Expenditure Inequality in Indonesia, 2008–2010: A Spatial Decomposition Analysis and the Role of Education

Abstract

Susenas panel data, this study examines expenditure inequality from spatial perspectives in Indonesia, using three decomposition methods: (i) a conventional Theil index decomposition; (ii) an alternative Theil index decomposition proposed by Elbers et al. (2008); and (iii) the Blinder−Oaxaca decomposition. Our results show that overall inequality in per capita expenditure increases between 2008 and 2010, which coincides with a rising trend in the official Gini coefficient. The contribution of inequality within urban and rural areas to total inequality is larger than that of inequality between urban and rural areas. Looking within urban and rural areas, urban inequality is significantly higher than rural inequality. Java-Bali in particular records very high urban inequality. Overall, urban inequality increases, urban-rural inequality remains stable, rural inequality decreases, and inequality at the national level increases. Although urban-rural inequality has a relatively low share in overall inequality, the share is not small enough to ignore its impact. Furthermore, when using the alternative decomposition method, the contribution of urban-rural inequality increases substantially. The present study also found that educational differences appear to have played an important role in expenditure inequality within urban areas and between urban and rural areas.

Inequality convergence in inefficiency and interprovincial income inequality in Indonesia for 1990–2010

“…Several studies examine the factors underlying interregional income inequality, employing various inequality measures and factor decomposition techniques (e.g., Islam and Khan 1986;Akita 1988;Azis 1990;Akita and Lukman 1995;Garcia and Soelistianingsih 1998;Akita et al 1999;Hill 2000;Tadjoeddin et al 2001;Akita and Alisjahbana 2002;Hill 2002;Akita 2003;Milanovic 2005;Akita and Miyata 2008;Hill 2008;Akita and Miyata 2010;Kataoka 2010;Akita, et al 2011;Hayashi et al 2014). One decomposition technique for income inequality is to analyze the factors affecting gross regional domestic product (GRDP) by sectoral income source and hierarchical regional structure (Akita and Lukman 1995;Tadjoeddin et al 2001;Akita and Alisjahbana 2002;Akita 2003;Miyata 2008, 2010;Kataoka 2010;Akita et al 2011).…”

“…One decomposition technique for income inequality is to analyze the factors affecting gross regional domestic product (GRDP) by sectoral income source and hierarchical regional structure (Akita and Lukman 1995;Tadjoeddin et al 2001;Akita and Alisjahbana 2002;Akita 2003;Miyata 2008, 2010;Kataoka 2010;Akita et al 2011). Another method is to analyze the factors associated with expenditure data by household head subgroup, such as province, location, educational attainment, gender, and age (Akita et al 1999;Akita and Miyata 2008;Hayashi et al 2014). However, to the best of our knowledge, very few studies have examined the interregional income inequality associated with efficiency factors in Indonesia.…”

Dynamics and Sources of Expenditure Inequality in Bhutan: Theil and Blinder Oaxaca Decomposition Analysis

“…For example, an analysis on expenditure inequality in Indonesia using the household expenditure data of 1987, 1990 and 1993 by Akita et al [16] uses Theil decomposition. Hayashi et al [17] also use an alternative Theil decomposition and Blinder-Oaxaca decomposition besides the conventional Theil decomposition to study expenditure inequality in Indonesia.…”

Educational Expansion and the Role of Education in Expenditure Inequality in Indonesia Since the 1997 Financial Crisis

“…Indonesia based on Susenas data. 5 Among these studies, Akita and Miyata (2008), Akita and Miyata (2013) and Hayashi, Kataoka and Akita (2014) examined the role of education in expenditure inequality in Indonesia. Akita and Miyata (2008) used monthly household expenditure data from the 1996, 1999 and 2002 Susenas to investigate the evolution of expenditure inequality associated with urbanization and educational expansion.…”

“…Akita and Miyata (2008) used monthly household expenditure data from the 1996, 1999 and 2002 Susenas to investigate the evolution of expenditure inequality associated with urbanization and educational expansion. According to them, widening inequality among urban households with higher levels of education, together with urbanization and educational expansion, appears to have contributed prominently to a rise in overall inequality over the period 1996-2002. Hayashi, Kataoka and Akita (2014…”