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The impact of education on inequality in a decentralized Indonesia

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  • Matondang Elsa Siburian

Abstract

The main objective of this paper is to clarify the impact of education on income inequality in a decentralized Indonesia. This paper uses Indonesian provincial-level data from 2001 to 2018 and dynamic panel estimation techniques to deal with the estimation’s potential persistence and endogeneity problems. The result provides evidence that the higher level of fiscal decentralization, the weaker the effect of schoolyears on income inequality. Fiscal decentralization moderates the positive relationship between schoolyears and income inequality such that the relationship is weakened when the level of fiscal decentralization is higher and stronger when the level of fiscal decentralization is lower. Fiscal decentralization may enable the local government to improve its capacity to reduce the income inequality increases caused by improved educational outcomes. This paper proposes a set of policy recommendations for the government to alleviate the effect of education outcomes on income inequality using fiscal decentralization.

Suggested Citation

  • Matondang Elsa Siburian, 2024. "The impact of education on inequality in a decentralized Indonesia," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 29(4), pages 1995-2006, October.
    • Handle: RePEc:taf:rjapxx:v:29:y:2024:i:4:p:1995-2006
    DOI: 10.1080/13547860.2023.2229653
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