Decentralization policy and equality: A Theil analysis of Indonesian income inequality

Djoni Hartono, Tony Irawan

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

Although the impacts of income inequality on growth have been mixing and conflicting; it is really important to understand the structure of income inequality. Therefore, this study tries to analyze income inequality during the implementation of decentralization. First, the validity of Kuznet hypothesis is checked by using the cross-province data. Then, the gini coefficient both in rural and urban for each province in Indonesia are calculated. After that, the source of inequality can be figured out by constructing the Theil inequality index. This study argues that inequality in households might issue because of inequality problem in sectors. The findings suggest that Kuznet hypothesis is not valid for Indonesia case. Moreover, we found that inequality in urban is much worse than in rural - in almost all provinces. The inequality problem in the sectors differs across provinces.

Original languageEnglish
Pages (from-to)41-51
Number of pages11
JournalEuropean Journal of Economics, Finance and Administrative Sciences
Issue number29
Publication statusPublished - 1 Feb 2011

Keywords

  • Decentralization
  • Inequality
  • Theil Indices

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