The Evaluation Of Fiscal Decentralization Law Revision On Regional Income Inequality In Indonesia
DHARMAWAN, IRWAN (Adv.: Professor Takahiro Akita), Professor Takahiro Akita
This study conducts a research to estimate regional income inequality from 2005- 2009 in Indonesia by using a Theil index L based on district-level GDP and population data. The usage of district-level GDP and population data is to analyze and estimate more deeply due mainly to be able to determine not only between-region and between-province income inequality but also within-province inequality.The finding suggests that as measured by the Theil index L, excluding the oil and gas sectors, there is a downward trend during the period, in which overall regional inequality varies for from 0.313 in 2005 to 0.310 in 2009. During that period, Indonesia reached an annual average growth rate of more than 3 per cent. According to the two-stage nested inequality decomposition method, the decrease is due to a fall in the withinprovince inequality component, mostly in the province of Kepulauan Riau, North Sulawesi, West Nusa Tenggara, and Papua. Policymaker should more focus on within-province than between-province or between-region inequalities to formulate better regional policies.
Kata Kunci : Indonesia, Regional Income Inequality, Two-Stage Nested Inequality Decomposition Method, GDP and Population
