Determinant of urban inequality in Indonesia

SETYAWAN, Heru, Takahiro Akita

2010 | Tesis | S2 Magister Ekonomika Pembangunan

This study examines urban inequality changes associated with the shift of population from rural to urban sectors in Indonesia from 1996 to 2005. This study also aims to investigate the factors influencing the increase of urban inequality by applying the Theil inequality decomposition technique and the Gini coefficients. We first compare urban and rural sectors in terms of monthly per capita household expenditure and population share. Then, one-stage Theil decomposition analysis is conducted to see how much urban and rural sectors contribute to overall expenditure inequality in Indonesia. After that, we explore the factors of expenditure inequality in urban areas. Then, the urban inequality is decomposed additively into within-group and between-group components in terms of socio economic characteristic of heads of household as location, education, gender, and age. The urban-rural ratio of mean per capita household expenditure was stable at around 1.8 in 1996 and 1999. Indonesia recovered from the economic crisis in the early 2000s, and its real growth rates returned to positive after 2000. The positive growth rates appear to have raised the urban-rural disparity conspicuously, as the urban-rural ratio went up to 2.2 in 2002 and 2005. In addition, among the factors of urban inequality, education seems to have been the main factor. Conversely, region, age and gender do not seem to be a significant factor of urban inequality. Their contributions (i.e., the contribution of the between-group component) to urban inequality were all less than 3% over the study period.

Kata Kunci : urban inequality, per capita household expenditure and population share