Interregional Inequalities in Indonesia: A Sectoral Decomposition Analysis for 1975–92

Abstract

In this paper we examine interregional income inequalities in Indonesia from 1975 to 1992, Williamson's weighted coefficient of variation is used to measure interregional income inequality. We also perform a sectoral decomposition analysis to investigate the extent to which industrial sectors contribute to the overall weighted coefficient of variation. One major finding is that, although interregional income inequality remained fairly stable in non-mining GDP during the study period, it has undergone a significant change in structure. The contribution of the tertiary sector to inequality, though still dominant, has gradually declined. The secondary sector, meanwhile, is playing an increasingly important role, reflecting its growing share of GDP. Inequality is much smaller in consumption expenditure than in non-mining GDP. Its consistently high levels in fixed capital formation reflect the uneven distribution of investments over space in Indonesia.

Additional information

Notes on contributors

Takahiro Akita

The authors gratefully acknowledge the support of the Foundation of International Education (Kokusai Kyoiku Zaidan). We would also like to thank members of the Indonesia Project at the Australian National University for enabling us to carry out our research there. Earlier versions of this paper were presented at a seminar organised by the Indonesia Project at the Australian National University in April 1994, and at the Fourth Convention of the East Asian Economic Association, held in Taipei in August 1994. H.W. Arndt, Benjamin Higgins, Kali Kalirajan, Chris Manning, Peter Warr and an anonymous referee provided valuable comments on earlier drafts of the manuscript.