Linda Nur Rachmawati, Firsty Ramadhona Amalia Lubis, Nurul Azizah Azzakiyyah

Regional income disparities in Indonesia: Insights from the Williamson index and panel data analysis

Introduction

Regional income disparities in indonesia: insights from the williamson index and panel data analysis. Analyze Indonesia's regional income disparities using the Williamson index and panel data (2018-2022). Examines GRDP, HDI, unemployment, and investment impacts on inequality for policy insights.

Abstract

Indonesia records the highest income disparity in Southeast Asia and ranks sixth globally in terms of income inequality, as evidenced by its position in recent international analyses and inequality reports. This study aims to examine the effects of Gross Regional Domestic Product (GRDP) per capita, Human Development Index (HDI), Open Unemployment Rate (OUR), and investment on income distribution inequality, measured using the Williamson Index in Indonesia. The research utilizes panel data spanning from 2018 to 2022 across 34 provinces. A multiple linear regression analysis with panel data methodology was employed, selecting the Fixed Effect Model (FEM) as the most suitable estimator.​ The findings reveal that, collectively, all independent variables in the model significantly influence income distribution inequality. Individually, GRDP per capita has a positive and significant effect on income inequality, HDI exhibits a negative and significant impact, OUR shows no significant effect, while investment negatively and significantly affects income distribution inequality. ​This study contributes by providing input to stakeholders in formulating policies that can be implemented to address income distribution inequality, particularly in the Indonesia.

Review

The study "Regional income disparities in Indonesia: Insights from the Williamson index and panel data analysis" addresses a critically important topic, given Indonesia's pronounced challenges with income disparity both regionally and globally. The authors clearly define their objective: to investigate key determinants of income distribution inequality, specifically using the Williamson Index, by analyzing the effects of GRDP per capita, HDI, Open Unemployment Rate (OUR), and investment. The methodology appears sound, employing panel data from 34 provinces over a recent five-year period (2018-2022) and appropriately selecting the Fixed Effect Model (FEM), which is well-suited for controlling unobserved provincial heterogeneity. The findings offer valuable insights into the complex dynamics of regional inequality. Collectively, the independent variables significantly influence income disparity, highlighting the need for multi-pronged policy approaches. Individually, the results generally align with economic expectations, with GRDP per capita positively and significantly exacerbating inequality—a pattern often observed in economies experiencing concentrated or uneven growth. Encouragingly, HDI demonstrates a significant negative impact, underscoring the vital role of human capital development in fostering more equitable income distribution. Similarly, investment shows a beneficial negative and significant effect, suggesting that strategic investments can contribute to reducing regional disparities. A notable finding is the non-significant effect of the Open Unemployment Rate, which warrants further consideration or contextualization within the specific labor market conditions of Indonesia. This research makes a commendable contribution by providing robust empirical evidence directly applicable to policy formulation in Indonesia. The use of the Williamson Index is appropriate for measuring regional disparities, and the panel data methodology, particularly FEM, enhances the credibility of the findings by accounting for unobserved heterogeneity. To further strengthen future discussions or subsequent research, it might be beneficial to delve deeper into the *mechanisms* through which GRDP per capita contributes to inequality, perhaps by differentiating between types of economic activities or growth drivers. Additionally, while the study emphasizes its contribution to policy input, a more explicit discussion detailing specific, actionable policy recommendations derived from the findings could further amplify its practical impact for stakeholders.

Full Text

Comments

You need to be logged in to post a comment.