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Regional Income Inequality in Indonesia: The Role of Public and Private Investment

Author

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  • Hakim, Dani Rahman

    (Faculty of Economics and Business Universitas Pamulang Jl. Surya Kencana No.1, Pamulang Bar., Kec. Pamulang, Kota Tangerang Selatan, Banten 15417, INDONESIA.)

  • Rosini, Iin

    (Faculty of Economics and Business Universitas Pamulang Jl. Surya Kencana No.1, Pamulang Bar., Kec. Pamulang, Kota Tangerang Selatan, Banten 15417, INDONESIA.)

Abstract

This study analyzed the effect of investment on regional income inequality in Indonesia using a panel dataset on 33 provinces for the period 2006 -2021. We distinguished among three forms of investment, namely, regional public investment (RDI), private domestic investment (PDI), and foreign direct investment (FDI). By employing a dynamic panel system generalized method of moment (Sys-GMM) estimation, this study revealed that PDI exacerbated regional income inequality. Even though PDI alongside FDI positive affect regional economic growth. Among other findings, school participation rate and internet access reduced regional income inequality. But average years of schooling is associated with increased regional inequality suggesting that the school completion benefited middle- and high-income groups. The regional government needs to open up greater access to secondary education and create more proper digital infrastructure in remote areas.

Suggested Citation

  • Hakim, Dani Rahman & Rosini, Iin, 2022. "Regional Income Inequality in Indonesia: The Role of Public and Private Investment," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(3), pages 87-101.
    • Handle: RePEc:ukm:jlekon:v:56:y:2022:i:3:p:87-101
    DOI: http://dx.doi.org/10.17576/JEM-2022-5603-05
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    More about this item

    Keywords

    education; internet; investment; regional income inequality;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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