bulletin of indonesian economic studies volume 38 issue 2 2002 [doi 10.1080%2f000749102320145057]...

7/26/2019 Bulletin of Indonesian Economic Studies Volume 38 Issue 2 2002 [Doi 10.1080%2f000749102320145057] Akita, Ta

http:///reader/full/bulletin-of-indonesian-economic-studies-volume-38-issue-2-2002-doi-1010802f00074910232014 1/23

This article was downloaded by: [University of Alberta]On: 23 June 2013, At: 08:35Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number:1072954 Registered office: Mortimer House, 37-41 Mortimer Street,London W1T 3JH, UK

Bulletin of Indonesian

Economic StudiesPublication details, including instructions for

authors and subscription information:

http://www.tandfonline.com/loi/cbie20

REGIONAL INCOMEINEQUALITY IN INDONESIA

AND THE INITIAL IMPACT OF

THE ECONOMIC CRISISTakahiro Akita

Published online: 17 Jun 2010.

To cite this article:Takahiro Akita (2002): REGIONAL INCOME INEQUALITY

IN INDONESIA AND THE INITIAL IMPACT OF THE ECONOMIC CRISIS, Bulletin of

Indonesian Economic Studies, 38:2, 201-222

To link to this article: http://dx.doi.org/10.1080/000749102320145057

PLEASE SCROLL DOWN FOR ARTICLE

Full terms and conditions of use: http://www.tandfonline.com/page/terms-and-conditions

This article may be used for research, teaching, and private studypurposes. Any substantial or systematic reproduction, redistribution,reselling, loan, sub-licensing, systematic supply, or distribution in anyform to anyone is expressly forbidden.

The publisher does not give any warranty express or implied or make anyrepresentation that the contents will be complete or accurate or up todate. The accuracy of any instructions, formulae, and drug doses shouldbe independently verified with primary sources. The publisher shall notbe liable for any loss, actions, claims, proceedings, demand, or costs ordamages whatsoever or howsoever caused arising directly or indirectly inconnection with or arising out of the use of this material.
http://www.tandfonline.com/loi/cbie20http://www.tandfonline.com/page/terms-and-conditionshttp://www.tandfonline.com/page/terms-and-conditionshttp://dx.doi.org/10.1080/000749102320145057http://www.tandfonline.com/loi/cbie20



ISSN 0007-4918print/ISSN1472-7234 online/02/020201 -22 2002 IndonesiaProject ANU

BulletinofIndonesianEconomicStudies,Vol.38,No.2,2002:20122

REGIONALINCOMEINEQUALITYININDONESIA

AND

THE

INITIAL

IMPACT

OF

THE

ECONOMIC

CRISIS

TakahiroAkita

International UniversityofJapan,Yamato-machi,Niigata

ArmidaS.Alisjahbana*

Padjadjaran University, Bandung

Thispaperestimatesregionalincomeinequalityfrom1993to1998,usingaTheilindexbasedupondistrict-levelGDPand populationdata.Between1993and1997,when Indonesiasannualaveragegrowthrateexceeded7%,regional income in-equalityrosesignificantly.Atwo-stagenestedinequalitydecomposition analysisindicatesthiswasdue mainlytoan increaseinwithin-provinceinequality, espe-ciallyinRiau,JakartaandWestandEastJava.In1997,thewithin-provincecompo-

nentrepresented about50%ofregional income inequality. ThecrisiscausedpercapitaGDPgrowthtoreverttoits1995level,buttheimpactwasspreadunevenlyacrossprovincesanddistricts.In1998regional income inequalitydeclinedto its199394level.Incontrastto199397,three-quartersofthe1998declinewas duetoachangeinbetween-provinceinequality, withtheJavaBaliregionplayingapromi-nentrole.Thecrisisappearsparticularly tohaveafflictedurbanJavaandurbanSumatra.

facturingsectorsshareofGDProsefrom12% to 21% between 1985 and 1995,whileagricultureandminingscombinedsharedeclined from 46% to 26%.Thechangewasmostconspicuousinexports,inwhichtheshareofmanufacturingrosefrom17%to53%,whilethatofagricul-

tureandminingcombinedfellfrom73%to22%.Theeconomiccrisisthatbegan

in 1997suddenly brought Indonesiasdynamiceconomytoastandstill, andin1998itcontractedby13%.Thecrisiscastashadownotonlyonthefinancialbutalsoontherealsectoroftheeconomy.Theconstruction andnon-oilmanufac-

INTRODUCTION

Duringthelate1980sandthe1990s,be-fore th e economic crisis, Indonesiaachievedanannualaveragegrowthrateofmorethan7%,comparabletotherapidgrowthofthe1970s.However,thislatergrowthwasachievedwithouttheben-

efitoflargeoilrevenuewindfalls.Inthedecadebeforetheeconomiccrisisin1997,Indonesiaunderwentremarkablestruc-

turalchangesinproductionandtrade.Theseincludedasignificant declineinagriculture andminingsshareofvalueaddedandtrade,andanincreaseintheshareofmanufacturing.According toAkitaandHermawan(2000),themanu-

Download

edby[UniversityofAlbe

rta]at08:3523June2013



TakahiroAkitaandArmidaAlisjahbana202

turingsectorswerehardesthit,andcon-tractedinrealGDPtermsby33%and18%respectively.

Therapideconomicgrowthbeforethecrisiswasaccompanied byaremarkablystablelevelofregionalincomeinequal-

ity,asmeasuredintermsofprovincialGDPwith the oiland gas sectors ex-cluded(hereafternon-oilandgasGDP).AccordingtoAkitaandLukman(1995)and this studys calculations, t heweightedcoefficient ofvariationinpro-vincialnon-oiland gasGDPwasvirtu-

ally constant between 1985 and 1997:from1985to1993 itwas intherange0.540.55asmeasuredat1983constantprices;andfrom1993to1997,asmea-suredat1993constantprices,itwasintherange0.660.67.1Theweightedcoef-ficientof variation in provincial GDPwiththeoilandgassectorsincludedwasmuchlarger,owingtothesetwosectors

veryunevengeographical distribution,buteventhishasgraduallydecreasedasthecontribution oftheoilandgassec-torstototalGDPhasfallen(AkitaandLukman1995).

RegionalincomeinequalityreceivesagreatdealofpublicattentioninIndo-nesia,mainlybecauseofthepersistenceof largedifferences insocio-economicindicators among regions and prov-inces. In 1997, Java, representingslightly over 6% of Indonesias landarea,accountedfor58.6%oftotalpopu-lationand64.1%oftotalnon-oilandgasGDP,whiletheresource-richprovinceofIrianJaya,representing20% oftotallandarea,accountedforamere1.0%of

populationand1.6%ofnon-

oilandgasGDP. The per capitanon-oil and gasGDPoftherichestprovince(Jakarta)wasalmostninetimesaslargeasthatofthepoorest (East Nusa Tenggara, NTT).EvenwithinJava,largedisparities existinpercapitaGDPbetweenJakartaand

the other provinces. With respect toothersocio-economicindicators:(1)inJakarta,theproportionofpeoplebelowthepovertylinein1996was2.4%,whileinEastNusaTenggaraandMalukuit

was39%and45%,respectively;(2)thenumberofhospitalbedsperthousandpeople in1997was1.6 inJakarta,butless than 0. 3 in Lampung and WestNusaTenggara(NTB);and(3)thenum-

ber ofstudents attending senior highschool(eithergeneralorvocational) perthousand people in 1997 was 45 in

JakartaandYogyakarta,butonly15inSouthKalimantanandWestNusaTeng-gara(BPS2001).

ThemainpurposesofthispaperaretoestimateregionalincomeinequalityinIndonesiabetween1993and1998usingdistrict-levelGDPandpopulationdata(ascompiledbyBPS,theCentralStatis-ticsAgency),andtoanalysefactorsde-

termining regional income inequality,using the two-stagenested inequalitydecomposition method developed byAkita(2002).Thestudyperiodincludes1998, when living standards declinedsignificantlyinthemidstoftheeconomiccrisis; thus wealsoanalyse the initialimpactofthecrisisonregionalincomeinequality. MostpreviousstudieshaveemployedprovincialGDPandpopula-tiondatatomeasureregionalincomein-equality in Indonesia,and have beenunable to measure inequality withinprovinces.2Ouruseofdistrict-levelratherthanprovincialdataprovidesameanstoanalysenotonlybetween-provincebutalsowithin-provinceinequalities.

METHODANDDATA

TheTwo-StageNestedInequality

Decomposition

Method

WeestimateregionalincomeinequalityusingaTheilindexbasedupondistrict-level GDP andpopulation data. Theil

Download





RegionalIncome InequalityinIndonesia 203

indicesareadditivelydecomposableandpossessseveralcharacteristics desirableinmeasuresofregionalincomeinequal-ity:meanindependence,population-sizeindependence, and the PigouDaltonprincipleoftransfers(Bourguignon1979;Shorrocks1980).3 We conduct a two-stagenested inequalitydecompositionanalysistoexplorefactorsdeterminingregionalincomeinequality.Thismethod,asdevelopedbyAkita(2002),isanalo-goustoatwo-stagenesteddesignintheanalysisofvariance(ANOVA).Itdecom-

poses overall regional inequality, asmeasuredbyaTheilindexbasedondis-trict-levelGDPandpopulationdata,intothreecomponents: between-region,be-tween-provinceandwithin-provincein-equality.Thebetween-regioncomponentreflectsinequalitiesbetweenthefivema-jor islands or island groups: Sumatra,JavaBali, Kalimantan, Sulawesi and

Other.Thebetween-provincecompo-nentisanaverageofbetween-provinceinequalities(calculatedforeachofthefiveregions)weightedbyGDPshares.Thewithin-provincecomponentisanaver-age of within-province inequalities(calculated foreachofthe27provinces,thenstillincludingEastTimor)weightedbyGDPshares.(Appendix1providesadetailed account of the method.) Thisapproachcanthereforeanalyseinaco-

herent framework the contribution tooverall regional income inequality ofwithin-provinceaswellasbetween-prov-inceandbetween-regioninequalities.

The

Data

Inordertoestimateregionalincomein-

equalityandconductatwo-stagenestedinequalitydecomposition analysis,weusedistrict-levelGDPdatafromtheBPSseriesGrossRegionalDomesticProductofRegencies/Municipalities inIndonesia(BPS1997b,1998a,2000a),whereGDPfigures

arereportedinconstant1993prices.Thedistrict-levelstatisticsprovidedataontotalGDPandGDPwiththeoilandgassectors(includingoilandgasextraction,oilrefiningandLNG)excluded.ForIrianJayasFak-Fakdistrict,theGDPfigureafterexclusionofnon-oilandgasminingisalsoreported,owingtothatsectorsdominanceintheeconomy.4

RegionalGDPshowstheamountofincomegeneratedwithinaregion,ratherthantheincomereceivedbytheregionsinhabitants. Much of the value added

generated by a resource-

rich regionthroughextractionactivitieshasnothis-toricallyaccruedtoitspopulation, buthas gone instead to other regions orabroad(forexample,thebulkofincomederivedfromoilandgashasaccruedtothecentralgovernment,withonlyasmallportiongoingtothegovernments andpeopleoftheproducingregions).Thisis

lesssosincetheimplementation in2001ofLawNo.25/1999onthefinancialbal-ance between the centre andregionalgovernments. However,itwasthecasefor the years included in thepresentstudy,andforthisreasonourstudy,likepreviousstudiesofregionalincomedis-paritiesinIndonesia,excludestheoilandgassectorsintheestimationofregionalincomeinequality. 5

Wealsouseprovincialnon-oilandgasGDPdatafromBPSsGrossRegionalDo-

mesticProductofProvincesinIndonesiabyIndustrialOrigin(BPS2000b)toconductashiftandshareanalysisofprovincialdifferencesinthegrowthrateofGDPbe-tween1997and1998(appendix2).

REGIONAL

INCOME

INEQUALITY

BEFORE

THE

ECONOMIC

CRISIS

Table1andfigure1presenttheresultsofthe two-stagenestedinequalityde-composition analysis. Before the eco-nomic crisis, overall regional income

Download






TABLE1

Two-StageNestedInequality

Decomposition,

1993

98

(excludingtheoilandgassector)

1993

199

4

1995

1996

1997

1998

Regionand

Theil

T

Contrib.b

TheilT

Contrib.b

TheilT

Contrib.b

TheilT

Contrib.b

TheilT

Contrib.b

TheilTContrib.b

Provincea

(%)

(%)

(%

)

(%)

(%)

(%)

Sumatra(73)

0.02

4

1.7

0.0

25

1.7

0.0

28

1.9

0.0

28

1.8

0.0

31

2.0

0.0

32

2.3

DIAceh(10)

0.01

9

0.1

0.019

0.1

0.019

0.1

0.019

0.1

0.020

0.1

0.018

0.1

NSumatra(17)

0.04

3

1.0

0.042

1.0

0.038

0.9

0.037

0.8

0.038

0.8

0.034

0.8

W

Sumatra(14)

0.08

2

0.7

0.084

0.7

0.090

0.7

0.087

0.6

0.088

0.6

0.111

0.9

Riau(7)

0.22

5

1.8

0.240

1.9

0.257

2.0

0.274

2.1

0.299

2.3

0.303

2.8

Jambi(6)

0.03

3

0.1

0.033

0.1

0.036

0.1

0.037

0.1

0.037

0.1

0.036

0.1

SSumatra(10)

0.03

2

0.4

0.033

0.4

0.034

0.4

0.034

0.4

0.036

0.4

0.031

0.4

Bengkulu(4)

0.01

6

0.0

0.016

0.0

0.015

0.0

0.014

0.0

0.019

0.0

0.016

0.0

Lampung(5)

0.06

6

0.5

0.065

0.5

0.074

0.5

0.060

0.4

0.065

0.4

0.048

0.3

Java

Bali(116)

0.17

2

43.4

0.1

71

42.4

0.1

70

41.0

0.1

69

39.9

0.1

67

38.6

0.1

46

35.1

DKIJakarta(5)

0.07

4

5.0

0.079

5.2

0.084

5.4

0.089

5.6

0.090

5.5

0.118

7.1

W

Java(25)

0.08

3

5.7

0.088

6.0

0.098

6.5

0.101

6.7

0.115

7.7

0.101

6.8

CJava(35)

0.16

1

6.7

0.172

6.9

0.178

6.8

0.186

7.0

0.187

6.7

0.166

6.6

DIYogyakarta(5)

0.05

9

0.3

0.059

0.3

0.062

0.3

0.064

0.3

0.069

0.3

0.068

0.3

EJava(37)

0.31

1

19.3

0.326

19.7

0.343

20.0

0.358

20.6

0.377

20.9

0.365

22.0

Bali(9)

0.09

7

0.7

0.097

0.7

0.097

0.7

0.097

0.7

0.097

0.7

0.090

0.7

Kalimantan(29)

0.06

6

1.8

0.0

65

1.7

0.0

69

1.8

0.0

70

1.9

0.0

69

1.8

0.0

76

2.3

W

Kalimantan(7)

0.11

0

0.8

0.109

0.7

0.107

0.7

0.105

0.7

0.105

0.7

0.103

0.8

CKalimantan(6)

0.03

3

0.1

0.033

0.1

0.036

0.1

0.038

0.2

0.039

0.2

0.039

0.2

SKalimantan(10)

0.06

6

0.4

0.064

0.4

0.060

0.4

0.054

0.3

0.058

0.3

0.069

0.4

EKalimantan(6)

0.02

5

0.3

0.022

0.2

0.021

0.2

0.026

0.3

0.024

0.2

0.027

0.3

Download






TABLE1(continued)Two-StageNestedIne

qualityDecomposition,

1993

98

(excludingtheoilandg

assector)

1993

1994

1995

1996

1997

1998

Regionand

Theil

T

Contrib.b

TheilT

Contrib.b

TheilT

Contr

ib.b

TheilT

Contrib.b

TheilT

Contrib.b

The

ilTContrib.b

Provincea

(%)

(%)

(%

)

(%)

(%)

(%)

Sulawesi(38)

0.002

0.0

0.003

0.1

0.004

0.1

0.006

0.1

0.006

0.1

0.0

08

0.2

NSulawesi(7)

0.038

0.1

0.038

0.1

0.037

0.1

0.038

0.1

0.041

0.1

0.0

46

0.2

CSulawesi(4)

0.002

0.0

0.001

0.0

0.001

0.0

0.001

0.0

0.001

0.0

0.0

02

0.0

SSulawesi(23)

0.068

0.7

0.071

0.7

0.071

0.7

0.072

0.7

0.077

0.7

0.0

70

0.7

SESulawesi(4)

0.011

0.0

0.010

0.0

0.015

0.0

0.011

0.0

0.013

0.0

0.0

17

0.0

Other(47)

0.059

0.8

0.055

0.7

0.052

0.7

0.049

0.6

0.059

0.7

0.0

56

0.8

NTB(7)

0.022

0.1

0.023

0.1

0.023

0.1

0.023

0.1

0.024

0.1

0.0

25

0.1

NTT(12)

0.047

0.1

0.050

0.1

0.058

0.2

0.063

0.2

0.060

0.2

0.0

56

0.2

ETimor(13)

0.079

0.1

0.081

0.1

0.081

0.1

0.077

0.1

0.083

0.1

0.0

73

0.1

Maluku(5)

0.041

0.1

0.046

0.1

0.051

0.2

0.055

0.2

0.063

0.2

0.0

62

0.2

IrianJaya(10)

0.112

0.4

0.111

0.4

0.109

0.3

0.106

0.3

0.141

0.5

0.1

36

0.5

Withinprovince

0.119

45.5

0.125

46.5

0.131

47.4

0.136

48.4

0.143

49.7

0.1

41

52.8

Betweenprovince

0.125

47.7

0.125

46.6

0.125

45.4

0.124

44.2

0.124

43.1

0.1

08

40.6

Betweenregion

0.018

6.9

0.019

7.0

0.020

7.2

0.021

7.4

0.021

7.2

0.0

18

6.6

Total

0.262

100.0

0.269

100.0

0.276

100.0

0.281

100.0

0.287

100.0

0.2

66

100.0

aFiguresinparenthesesarethenumberofkabupatenandkotamadya.

bContrib.isthe%

contributiontototalregionalinequalityT

d

inappend

ix1,equation(5).Theco

ntributionfigureforaregionisthe%

contributionoftheregionsbetween-provinceinequality(Y

i/Y)T

pi

inequation(5)whilethecont

ributionfigureforaprovinceisthe%

contributionoftheprovin

ceswithin-provinceinequality(Y

ij/Y)T

ijinequation(5).

Sources:BPS(1997b,1998a

and2000a).

Download






inequalityincreasedsignificantly, from0.262in1993to0.287in1997.Decom-positionofoverall inequality into thewithin-province,between-provinceand

between-regioncomponentsrevealsthatthisincreasewasduemainlytotheriseinthewithin-provinceinequalitycom-ponent: its contribution to overall in-equalityrosefrom45.5%to49.7%.Thebetween-regioncomponentalsocontrib-utedtotheincrease,butonlyslightly.Ontheotherhand,thebetween-prov-

incecomponentwasverystable:itscon-

tributionfellfrom47.7%to43.1%.

Between-RegionInequality

Among the five regions, KalimantanhadthehighestpercapitaGDPoverthe199397period;itwasfollowedbyJavaBali, Sumatra, Sulawesi and Other(table2).Themodestincreaseinthebe-

tween-regioninequalitycomponentinthepre-crisisperiodseemstohavebeenduetoanincreasingdisparitybetweenSumatra/JavaBali/Kalimantan and

Sulawesi/Other.

Between-ProvinceInequalities

Thoughthebetween-provinceinequalitycomponentremainedrelativelyconstantoverthe199397period,eachregionre-cordedadistinctmovementinbetween-province inequality (figure2).Largely

becauseoftheeffectofJakarta,Java

Balisbetween-province inequality was thehighest.However, itexhibitedaslightdecreasingtrend,mainly,itseems,be-causepercapitaGDPgrewmuchfasterinWestJavathanintheotherJavaBaliprovinces.Accordingly, whereasWestJavas percapita GDPwasthesecondlowestamongtheJavaBaliprovincesin

0.00

0.10

0.20

0.30

93 94 95 96 97 98

Theil T

Within-province inequality component

Between-province inequality component

Between-region inequality component

FIGURE1 Two-StageNestedInequalityDecomposition, 199398(excludingtheoilandgassector)

Source:Asfortable1.

Download






TABLE2PerCapitaNon-oilandGasGDP(basedondistrict-leveldata)

Regionand PerCapitaGDP(Rp000) GrowthRate(%)

Province1993 1997 1998 199397 199798

Sumatra 1,342 1,718 1,584 6.4 7.8

DIAceh 1,308 1,644 1,522 5.9 7.5NSumatra 1,649 2,187 1,981 7.3 9.4WSumatra 1,449 1,816 1,679 5.8 7.5Riau 1,635 2,163 2,119 7.2 2.0

Jambi 1,078 1,297 1,180 4.7 9.0

SSumatra 1,246 1,573 1,442 6.0 -8.3Bengkulu 1,100 1,226 1,171 2.7 -4.4Lampung 853 1,060 959 5.6 -9.5

JavaBali 1,662 2,174 1,853 6.9 14.8

DKIJakarta 5,802 7,424 5,979 6.4 19.5WJava 1,377 1,882 1,547 8.1 17.8CJava 1,070 1,339 1,211 5.8 9.5DIYogyakarta 1,391 1,760 1,563 6.1 11.2EJava 1,405 1,828 1,632 6.8 10.7

Bali 2,010 2,579 2,447 6.4 5.1Kalimantan 2,044 2,682 2,585 7.0 3.6WKalimantan 1,506 1,963 1,889 6.8 3.8CKalimantan 1,968 2,539 2,373 6.6 6.5SKalimantan 1,624 2,092 1,965 6.5 6.1EKalimantan 3,516 4,619 4,559 7.1 1.3

Sulawesi 1,008 1,264 1,201 5.8 5.0

NSulawesi 1,091 1,465 1,443 7.6 1.5CSulawesi 949 1,138 1,070 4.7 6.0

SSulawesi 1,023 1,284 1,211 5.8 5.7SESulawesi 861 995 917 3.7 7.8

Other 873 1,096 1,030 5.9 6.0

NTB 719 897 859 5.7 4.3NTT 610 771 718 6.0 6.9ETimor 624 826 813 7.3 1.5Maluku 1,220 1,442 1,343 4.3 6.9IrianJaya 1,398 1,829 1,694 6.9 7.4

Total 1,521 1,974 1,738 6.7 11.9

Sources:BPS(1997b,1998aand2000a).

1993, by1997 ithadbecome the thirdhighestafterJakartaandBali.6

DataonprovincialGDP fromGrossRegionalDomesticProductofProvincesinIndonesiabyIndustrialOrigin(BPS1996,

1998b,2000b)showthatbetween1993and 1997 WestJavasnon-oil and gasmanufacturinggrewonaverageby12.5%perannummuchmorerapidlythanthenational rate of 10.4%. In 1997 it ac-

Download






countedfor37.5%oftotalnon-oilandgasGDP;thecomparablefigureforIndonesiaasawholewas24.5%.

EastJavahadagrowthpatternsimi-lartothatofWestJava.Again,thenon-oilandgasmanufacturingsectorwastheengine of growth for the provincialeconomy,recordinganannualaveragegrowthrate of 12% between 1993 and1997,andaccountingfor30.2%oftotalGDPin1997.UnlikeWestandEastJava,JakartasGDPgrowthduringthe1993

97periodwas led by the constructionsector,whichexperienced anannualav-eragegrowthrateof12.6%andaccountedfor15.4%oftheprovincesGDPin1997.Jakartasgross fixed capital formationgrewrapidlyoverthisperiod,atanaver-age annual rate of 9.1% (BPS, 1997a,1999),contributing to the constructionsectorshighgrowthrate.

IncontrastwithJavaBali,theregionsofSumatra, Kalimantan and Sulawesirecordedrisinglevelsofbetween-prov-inceinequalityoverthe199397period(table1andfigure2).Kalimantanhadthesecondhighestbetween-provincein-equalityafterJavaBali,andexperienceda very slight increase. InKalimantan,there are very largedifferences inpercapitaGDPbetweentherichestprovince(EastKalimantan) and the other threeprovinces,andthesedifferencesseemto

haveincreasedinrelativeterms.In1997,the ratio of the per capita GDP ofKalimantansrichestprovincetothatofitspoorestwas2.4.Incontrast,SumatrasGDPwasmoreevenlydistributedamongitsprovincesandpopulation, butitsbe-tween-provinceinequalityincreasedoverthe 199397 period. The disparitiesbetween its richest province (North

FIGURE2 Between-ProvinceInequalitybyRegion,199398

Source:Asfortable1.

0.00

0.06

0.12

0.18

93 94 95 96 97 98

Theil T

SumatraJavaBali

KalimantanSulawesiOtherBetween-province inequality component

Download






Sumatra)andtheothersevenprovincesseemtohavebeenincreasing.WhileGDPismoreevenlydistributed amongprov-incesandpopulation inSulawesithanin Sumatra, Sulawesi experienced a

growth pattern similar to those ofSumatra an d Kalimantan, with pe rcapitaGDPgrowingfasterintherichestprovince (NorthSulawesi) than intheother provinces.Thus, Sulawesis be-tween-provinceinequalityrosebetween1993and1997.

Within-

Province

InequalitiesThewithin-provinceinequalitycompo-nentincreasedsignificantly from0.119to0.143overthe199397period(table1andfigure1). Asaresult,itscontribu-tiontooverallregionalinequalityrosefrom46%to50%.Theincreasewasduemainlytorisesinthewithin-provinceinequalities offourprovincesinparticu-

lar: Riau,Jakarta,WestJavaand EastJava.Whereastheircombinedcontribu-tiontooverallregionalinequalitywas32%in1993,ithadrisento37%by1997.Of the 23otherprovinces, 15 experi-enced an increase in within-provinceinequality.However,theircontributionsto th e total increase in th e within-provincecomponentofinequalitywereallnegligible.

OftheeightprovincesinSumatra,sixrecordedanincreaseinwithin-provinceinequalityoverthe199397period.How-ever,onlyRiausincreasewassignificant:itscontribution to overall regional in-equalityrosefrom1.8%to2.3%.In1997,Riau had the highest level of within-

provinceinequalityinSumatra,followedbyWestSumatraandLampung.RiauslevelofinequalityisduelargelytothespecialpositionofBatamIsland,locatedjust20kmsoutheastofSingapore,whichhasreceivedpreferentialtreatmentfromthecentral government asan export-oriented industrial zone.Batams percapitanon-oilandgasGDPofRp12.8

million was much higher than that ofRiausotherdistricts.

AmongtheJavaBaliprovinces,allbu t Bali experienced an increase inwithin-provinceinequality;inparticu-

lar,Jakarta,WestJavaandEastJavare-corded significant increases. In 1997,EastJavahadthehighestlevelofwithin-provinceinequality, accountingfor21%ofIndonesiasoverallregionalinequal-ity.Thisisduetotheexistenceofafewveryrichdistricts:urbanKediri,urbanSurabaya,and Gresik.Withitslimited

population, urban Kediris per capitaGDPwasthehighestintheentirecoun-tryatRp22.3million,wellaboveCen-tralJakartasfigureofRp16.8million.WhilefallingfarshortofKediri,Sura-

bayaandGresikhadpercapitaGDPofRp5.7and3.8million,respectively, bothsignificantlyhigher than thatofmostotherdistrictsinEastJava.

WithinJavaBali,CentralJavahadthesecondhighestlevelofwithin-provinceinequality in 1997. This was drivenmainlybythedistrictsofKudusandur-ban Semarang,bothofwhichhadrela-tivelyhighlevelsofpercapitaGDP(Rp5.0and4.2million,respectively).WestJavahadthethirdhighestlevelof in-equalityin1997,muchlowerthanthe

levels recorded for Central and EastJava.Thisisduetothefactthat,unlikeCentraland EastJava, which includetheprimarycitiesofSemarangandSura-baya,respectively,WestJavadoesnothaveaneconomically dominantcityandis relativelyuniformly developed. InWestJava, urban Tangerang had the

highestlevelofpercapitaGDP(Rp 5.3million),followedbyBekasiandSerang(each Rp 3.4 million),urban Cirebon(Rp3.3million), andurbanBandung(Rp2. 7million).Inotherdistricts,percapitaGDPrangedfromRp1.0to2.5million.

Among the Kalimantan provinces,WestKalimantanregisteredthehighest

Download






level of within-province inequality in1997.ThiswasdriveninpartbyurbanPontianak,whichhadthehighestlevelofpercapitaGDP (Rp 4.2million). Inotherdistricts,percapitaGDPranged

fromRp1.0toRp2.4million.Itisinter-esting toobservethatwhileEastKali-mantanhadveryhighpercapitanon-oilandgasGDP(Rp4.6million),itslevelofwithin-provinceinequalityisoneofthelowestinIndonesiaiftheoilandgassec-

torsareexcluded.AmongtheSulawesiprovinces,three

experienced aslightincreaseinwithin-

provinceinequality.SouthSulawesihadthehighestlevelin1997,dueinlargeparttoUjungPandangspercapitaGDPofRp2.5million.Sulawesihadaveryevendistributionofincome,however,notonlyamongbutalsowithinprovinces.WithintheOthercategory,IrianJayahadthehighestlevelofwithin-provinceinequal-

ityin1997.

THE

INITIAL

IMPACT

OF

THE

ECONOMIC

CRISIS

ON

REGIONAL

INCOME

INEQUALITY

Inthissection,weassumethatmostofthechangetobeobservedin1998reflectstheinitialimpactoftheeconomiccrisis,anduse1998district-levelandprovin-cialGDPdatatoanalysethisimpactonregionalincomeinequality.

Theeconomycontractedsignificantlyin1998asaresultofthecrisis.Accord-ingtodistrict-leveldataat1993constantprices,nationalaveragepercapitanon-oilandgasGDPfellby11.9% in 1998(table2),retreatingtoits1995level.7How-

ever,theimpactwasveryunevenacrossregionsandprovinces:whilemostprov-incesinJavarecordedafallof1020%inpercapitaGDP,theeffectsweremuchlesssevereintheOuterIslands.

Overallregionalincomeinequality,asmeasured by the Theil index T basedupondistrict-levelGDPandpopulationdata,declinedfrom0.287in1997to0.266

in 1998, which isessentially the samelevelasin199394(table1andfigure1).Thetwo-stageinequalitydecompositionanalysisrevealsthataboutthree-quartersofthedeclinewasduetothefallinthe

between-provinceinequalitycomponent;itscontribution tooverall regional in-equalitydecreasedto40.6%(from43.1%in1997).8Consequently,thecontributionofthewithin-provinceinequalitycompo-nenttooverallregionalinequalityrosesharplyto52.8%in1998(from49.7%),eventhoughthewithin-provinceinequal-

itycomponentitselfrecordedaslightfall.Thebetween-regioninequalitycompo-nentdeclinedalso,thoughonlyslightly.

Between-RegionInequality

TheeconomiccrisisreducedJavaBalispercapitanon-oilandgasGDPby14.8%in1998(table2),bringingittothesamelevelasin199495.Sumatraspercapita

GDPalsodeclinedsignificantly in1998,thoughlesssothanthatofJavaBali;itfelltothesamelevelasin199596.Ontheotherhand,thecrisisseemstohaveaffectedKalimantanandSulawesiverylittle.Asaresult,between-regioninequal-

ityfellsomewhatfrom0.021in1996and1997to0.018in1998(table1).

Between-Province

Inequalities

JavaBalisbetween-provinceinequalityplayedamajorroleinthereductionofthebetween-provincecomponentofin-equality: itscontribution tooverallre-gionalinequalityfellfrom38.6%to35.1%in 1998 (table 1).Upon examining thetrend inJavaBalis between-province

inequalitysince1993,wefindthatthefallin1998isthecontinuation ofatrendthatbeganbefore1997(figure2),thoughitismuchsharperthaninpreviousyearsandisduetodifferentfactorsfromthoseof the pre-crisis period, asexplainedbelow.

The economiccrisisaffectedJakartainasignificant way.Itseconomycon-

Download






tractedby19%in1998,areductionofalmost20%inpercapitaGDP.There-sulting level is equivalent to that re-

cordedin1993(table2).TheeconomiesofWestandEastJavaalsocontracted

substantially, thoughbylessthanthatofJakarta.9TheprimaryreasonJavaBalirecorded asignificant fall inbetween-province inequalitybetween 1997 and1998appearstohavebeenJakartaslargedecline in per capita GDP relative tootherJavaBali provinces. This con-trastswiththe 199397period,which

saw a slight decline in Java

Balisbetween-provinceinequality,becauseper capita GDP grew much faster inWestJavathanintheotherJavaBaliprovinces.

Toanalyseregionaldifferences inthegrowthrateofGDPbetween1997and1998,ashiftandshareanalysiswasper-formedusingprovincialGDPdata(ap-

pendix2).Shiftandshareanalysisaimstoexaminethefactorsdetermining thegrowth of aregionbycomparing theregionsgrowthwiththegrowthofthenation as a whole. Itdecomposes theregions actual totalgrowth into threecomponents: theregionalsharecompo-nent,theindustry-mixshiftcomponentandthecompetitiveshiftcomponent.Thesectorclassification usedinthisanaly-siswas:agriculture;non-oilandgasmin-ing;non-oilandgasmanufacturing; gas,electricityandwater;construction;trade;transportandcommunication; finance;andservices.Theresultsarepresentedintable3.TheprovincesofJakarta,WestJavaandEastJavacontractedatmuch

fasterratesthanthenationasawhole;thusthefallintheirGDPexceededthecalculatedfalliftheseprovinceshadcon-tractedatthesamerateasthenation,i.e.totalgrowthminusregionalsharewasnegativefortheseprovinces.However,therearedifferencesinthepatternofcon-tractionbetweenJakartaandtheprov-incesofWestandEastJava:whilethe

industry-mixshiftcomponentplayedanimportant role in the contraction ofJakarta,thecompetitive-shiftcomponentplayedadominantroleinthecontrac-tionofWestandEastJava.10

InJakarta,thenon-oilandgasmanu-facturing,finance,andconstruction sec-torscontributed significantly toalargenegativeindustry-mixshift,reflectingtheregionsindustrialstructure,inwhichthecombinedGDPshareofthesethreeworstcrisis-hitindustrieswasabout60%.Thedeclinesinthesethreesectorsinthecoun-

try asawholewere18.2%, 17.3%and33.3%,respectively,muchlargerthanthenegativegrowthrateofthetotalnationaleconomy.InJakartathesethreesectorscontracted by 18.0%, 9.6% and 38.3%,respectively.

InWestJavathenon-oilandgasmanu-facturing,financeandconstruction sec-tors contributed to a large negative

competitive shift,withgrowthratesof21.4%,40.3%and46.2%,respectively.Thenon-oilandgasmanufacturing andtradesectorscontributed significantlytoEastJavas large negativecompetitiveshift,withgrowthratesof24.3%and17.8%,respectively. InWestJavaandEastJavatheindustry-mixshiftcompo-nentwasalsonegative,owingtoverylargenegativegrowthinthenon-oilandgasmanufacturingandconstruction sec-tors, whose combined GDP shares inWestandEastJavawere44%and36%,respectively. Nonetheless, theindustry-mix shift component (which is baseduponthegrowthratesof industriesinthe nation) was much less significant

than thecompetitive shift component,becauseoftheprominenceoftheagricul-turalsectorintheseprovincesandbe-causetheagricultural sectorwasmuchlessaffectedthanothersectorsbythecri-

sisinthenationasawhole.11

In contrast toJavaBali, KalimantanandSulawesibothrecordedanincreaseinbetween-province inequality in 1998

Download






(table1andfigure2).Thereasonseemsto

havebeenthatinbothregionstherichestprovinceEast Kalimantanand NorthSulawesi,respectivelyperformedbetterthantheothers,thoughalltheprovincesexperiencednegativegrowthinpercapitaGDP(table2).Accordingtotheshiftandshare analysis, East Kalimantan andNorthSulawesihadapositivetotalshift(=totalregionalgrowthminusregional

shareofnationalgrowth),andmorethan

three-

quartersofthetotalshiftwasac-

countedforbythecompetitiveshiftcom-ponent (table 3).East Kalimantan andNorthSulawesiseemtohavehadacom-

petitive advantage in non-oil and gasmanufacturing andtrade.InNorthSula-wesithesetwosectorsachievedlargeposi-tivegrowth,whereasinEastKalimantantheyneithergrewnorcontracted.

TABLE3 ShiftandShareAnalysisforProvinces,199798,BasedonNon-oilandGasGDP(Rpbillion)

Total Regional TotalSh ift Industry Co mpe ti ti ve

Growth Share (C)=(A)

(B) MixShift ShiftProvince (A) (B) =(D)+(E) (D) (E)

DIAceh 380 824 444 169 275NSumatra 2,733 3,139 406 368 38WSumatra 520 1,010 490 203 287Riau 155 1,080 925 57 982

Jambi 282 398 116 56 60SSumatra 1,082 1,551 470 127 342

Bengkulu 109 220 110 64 46Lampung 500 909 409 91 317

DKIJakarta 12,163 8,776 3,387 2,742 645WJava 12,744 8,583 4,161 567 3,595CJava 5,750 5,201 -549 170 719DIYogyakarta 596 667 71 31 40EJava 10,424 8,108 2,316 49 2,267Bali 306 954 648 173 475

WKalimantan 340 911 571 94 476CKalimantan 297 541 244 161 83SKalimantan 404 781 377 135 242EKalimantan 317 1,440 1,122 256 866

NSulawesi 89 475 386 88 299CSulawesi 92 292 201 83 118SSulawesi 570 1,248 678 302 377SESulawesi 95 207 112 36 77

NTB 125 424 300 122 178

NTT

77

358 281 119 162Maluku 183 388 205 49 156IrianJaya 931 916 1,847 518 1,329

Total 49,402 49,402 0 0 0

Source:BPS(2000b).

Download






Sumatrasbetween-provinceinequal-itywas stable between 1997and 1998(table1andfigure2).AmongSumatrasprovinces, Riau performed relativelywell.In1998,itbecametherichestprov-

ince inSumatra intermsofpercapitaGDP(table2).LikeEastKalimantanandNorthSulawesi,itappearstohavehadastrongcompetitive advantageinnon-oiland gas manufacturingand trade; itscompetitive shiftcomponentexplainedmostofitstotalshift(table3).

Within-

Province

InequalitiesInJavaBali,allprovincesexceptJakartaexperienced a fall in within-provinceinequality between 1997 and 1998(table 1).Jakart as within-provinceinequality rose in 1998, but this wa sthe continuation ofapre-crisistrend.Ja kartas rise in within-province in-

equalityoverthe199398periodseems

tohavebeenduetoarisingdisparitybetweenCentralJakarta,thesecondrich-estdistrictinIndonesianexttourbanKediri,andtheotherJakartadistricts.In1998,CentralJakartaexperienced an8%fallinpercapitaGDP,whiletheotherJakartadistrictsrecordedfallsof20%ormore.Togetherwiththefactthatthedis-tricts inWestJavaadjacenttoJakarta(Tangerang,BekasiandBogor)alsore-cordedfallsof20%ormoreinpercapitaGDP,thisindicatesthattheeconomiccrisishadverystrongadverseeffectsonthegreaterJakartametropolitanregion(Jabotabek).Thesevereeconomicdown-turninJabotabekwouldhavehadenor-mousdirectandindirecteffectsnotonly

on theother districtsofJava

Bali butalsoontheOuterIslands,forJabotabekgeneratedaboutaquarteroftotalIndo-nesiannon-oilandgasGDP,andtherearenumerousinterindustry linkagesbe-tweenJabotabekandotherregions,es-peciallyprovincesinJava.

EastJava had a slight decline inwithin-province inequality, but itstill

hadthehighestlevelofinequalityofalltheprovincesofIndonesia.LikeJabota-bek,EastJavasmajorurbanareaseemstohavebeenaffectedveryadverselybythecrisis;therelativelyrichdistrictsof

Surabaya,Sidoarjo and Gresik experi-encedpercapitaGDP growthratesof17%,18%and13%,respectively. Ontheotherhand,Indonesiasrichestdis-trict,Kediri,recordedonlyaminorreduc-tion inper capita GDP (3%). CentralJavas within-province inequality de-clinedsignificantly, almostretreatingto

its1993level.Again,thecrisishitCen-

tralJavas majorurbanareashardest:Semarang,Kendal,DemakandKudusrecorded significant falls in percapitaGDP(19%,13%,12%and13%,respec-

tively).Theseobservations,togetherwithJabotabeksverysevereeconomiccondi-tions in1998,confirmthatIndonesiaseconomic crisis was a crisis afflicting

urbanJava(Booth2000).ItalsohitmostoftheotherpartsoftheJavaBaliregion,buttoalesserextent.

Figure3depictsthefrequencydistri-butionofpercapitaGDP(usingthenatu-ral log scale) ofJavaBalisdistricts in1995,1997and1998.First,themodeofthedistribution shiftedfromthe7.07.2range in 1997 (corresponding toa per

capitaGDPrangeofRp1.10toRp1.34million)tothe6.87.0rangein1998(cor-respondingtoapercapitaGDPrangeofRp0.90toRp1.10million).Second,thenumberofdistrictswhosenaturallogofpercapitaGDPislessthanorequalto7.0(correspondingtopercapitaGDPoflessthanorequaltoRp1.10million)increased

from40to55(of116districts) in1998,slightlymorethanin1995(53districts).Third,thenumberofdistrictswhosenatu-rallogofpercapitaGDPisgreaterthanorequalto7.6(correspondingtopercapitaGDPofgreaterthanorequaltoRp2mil-lion)fellfrom42to33in1998,asmallernumberthanin1995(36districts).Insum,theeconomiccrisisseemstohaveshifted

Download






JavaBalis distribution to its pre-1995level.

InSumatra,allprovincesexceptWestSumatraandRiauexperienced afallinwithin-provinceinequalityin1998.Lam-pungrecordedasignificantdecreasein

its within-

province inequality,owingmainlytoasubstantialreductioninthepercapitaGDPofBandarLampung,therichestdistrict in theprovince.AmongSumatrasdistricts,BandaAceh,TebingTinggi, Medan,Binjai, Sawah Lunto,PalembangandBandarLampungregis-teredrelatively largefalls inpercapitaGDP(around15%).ButBatam,therich-

estdistrict inSumatra,was notsignifi-cantlyaffectedbythecrisis,sufferingonlya4%declineinpercapitaGDP.AsinJavaBali,theeconomiccrisisinSumatraseemstohavehitmajorurbanareashardest.

InKalimantan, theprovinceofSouthKalimantan recorded a significant in-creaseinwithin-provinceinequality, be-

causepercapitaGDPgrew(by3%)inKotaBaru,itsrichestdistrict,butfellsub-

stantiallyinitssecondandthirdrichestdistricts(BaritoKualaandBanjarmasin)(by9%and14%,respectively). Amongthe municipalities (kotamadya) in Kali-

mantan (Pontianak, Palangka Raya,Banjarmasin, Balikpapan and Sama-rinda), only Banjarmasin had a largedecineinpercapitaGDP,signifyingthatthecrisishadfewadverseeffectsonur-banKalimantan.

InSulawesi,allprovincesexperiencedaslightincreaseinwithin-provincein-equality in1998,withtheexceptionof

SouthSulawesi,inwhoserichestdistrict,UjungPandang,percapitaGDPfellsig-nificantly (by 9%). In North Sulawesi,four of the seven districts (Minahasa,SangileTalaud,GorontaloandBitung)recordedrisesinpercapitaGDP,thoughgrowthratesweremuchlowerthaninthepre-crisisperiod (13%vs612%).

FIGURE3 FrequencyDistribution ofthePerCapitaGDPofJavaBaliDistricts(naturallogscale)

Source:Asfortable1.

0

10

20

30

40

6.0 6.4 6.8 7.2 7.6 8.0 8.4 8.8Per capita GDP (log scale)

No. of districts

1995 1997 1998

Download






The crisis affected other Sulawesidis-trictsadversely,buttheeffectsseemtohavebeenuniformacrossdistricts.

Figure4presentsthefrequencydistri-butionofpercapitaGDP(usingthenatu-rallogscale)inOuterIslanddistrictsin

1995,1997and1998.First,thedistribu-

tionshiftedtotheleftin1998andback-tracked to approximately the 1995pattern,butthenumberofdistrictsinthe6.87.2range(correspondingtopercapitaGDPofRp0.901.34million)wasmuchsmallerin1998thanin1995(61vs69districts). Second,thenumberofdis-trictsfallinginthe6.26.8range(corre-

sponding to per capita GDP of Rp0.490.90million)in1997wasthesameasin1995,at35,butby1998ithadin-creasedto39.Third,thenumberofdis-trictswhosenaturallogofpercapitaGDPisgreaterthanorequalto7.6(correspond-ingtopercapitaGDPofRp2millionormore)fellfrom49to38in1998,onlyone

morethanin1995.Insum,theeconomiccrisisshiftedtheOuterIslandspercapitaGDPdistribution totheleft,buttheef-fectswerenotaslargeasinJavaBali.Itisinteresting tonotethat,incontrasttoJavaBali,theOuterIslandshadmoredis-

trictsinthe6.4

6.6range(correspond-

ing to per capita GDPof Rp 0.600.74million)thaninthe6.66.8range(corre-spondingtopercapitaGDPofRp0.740.90million).ThisisbecausetheOuterIslandsincludetheverypoorprovincesofWestandEastNusaTenggaraand(atthetimeofthestudy)EastTimor.

CONCLUDING

REMARKSAsmeasuredbyaTheilindexbasedondistrict-levelGDPandpopulationdata,overall regional income inequality in-creasedsignificantly over the 199397period (from 0.262 to 0.287), duringwhichtimeIndonesia achievedanan-nualaveragegrowthrateofmorethan

FIGURE4 FrequencyDistribution ofthePerCapitaGDPofOuterIslandsDistricts(naturallogscale)

Source:Asfortable1.

0

10

20

30

40

6.0 6.4 6.8 7.2 7.6 8.0 8.4 8.8Per capita GDP (log scale)

No. of districts

1995 1997 1998

Download






7%.ThisfindingdoesnotconflictwiththefactthatGDPandpopulationdatafromtheprovincialincomestatistics(BPS1996, 1998b and 2000b, which do notinclude district-leveldata) suggested

quitestableregionalinequalityoverthesameperiodbecause,accordingtothetwo-stagenestedinequalitydecomposi-tionanalysis,theincreaseisduemainlytoariseinthewithin-provinceinequal-itycomponent, especially in theprov-

incesofRiau,Jakarta,WestJavaandEastJava.12Thebetween-provinceinequality

componentincreasedalso,butonlyveryslightly,whereasthebetween-regionin-equality component was very stable.Within-provinceinequalitythusplayedanincreasingly importantroleinthede-

termination ofoverallregionalincomeinequality, asmeasuredusingdistrict-leveldata.In1997itaccountedforabouthalfofoverallregionalincomeinequal-

ity,whereasthebetween-provinceandbetween-regioninequalitycomponentscontributed43.1%and7.2%,respectively.Thisresultsuggeststhatitwouldbeverymisleading tobase ajudgment aboutwhetherregionalinequalityisincreas-ingordecreasingsolelyuponprovincialdata,especiallywhen the economy isgrowingveryrapidlyandundergoing

significant structuralchange.IntermsofpercapitaGDP,theeco-

nomic crisis caused th e Indonesianeconomytoreverttoits1995level.Theimpactswereveryunevenacrossprov-incesanddistricts,however.Overallre-gionalincomeinequality, asmeasuredusingdistrict-leveldata,declinedto0.266

in1998,whichcorresponded tothelevelprevailing in 199394. The tw o-stagenestedinequalitydecomposition analy-sisshowsthataboutthree-quartersofthe

declinewasduetothefallinthebetween-province inequality component. TheJavaBaliregionplayedaprominentroleinthefallinthiscomponent.Jakartawasthe hardest-hit province in Indonesia,

owingtoitsheavyrelianceonthenon-oilandgasmanufacturing,finance,andconstruction sectors,whichweremostadverselyaffectedbythecrisis;JakartaspercapitaGDPfellbyalmost20%,re-vertingtothelevelrecordedin1993.TheeconomiesofotherJavaprovincesalsocontracted significantly, buttheimpacts

werelessseverethaninJakarta.Asare-

sult, thepercapita GDP gap betweenJakartaandtheotherJavaBaliprovincesnarrowed. Among the Outer Islands,Sumatra experienceda 7% fall in percapitaGDP,buttheeconomiccrisisdoesnot seem tohave affected KalimantanandSulawesiveryseverely.Asaresult,the between-region inequality compo-

nentfellin1998.Theimpactoftheeconomiccrisiswas

bornedisproportionatelybyJavaBalismajorurbanareas.InJakartaandWestJava,theJabotabekdistrictswereseverelyaffected;withtheexceptionofCentralJakarta,allofthemrecordedadeclineof20%ormoreinpercapitaGDP.Asare-sult, within-province inequality fell in

WestJava.ItalsofellinCentralandEastJava,againbecauseofaverylargede-cline in percapita GDP in their majorurbandistricts.Theseobservations con-firmthatIndonesiaseconomiccrisiswasacrisisafflictingurbanJava.However,withtheexceptionofBatam,Sumatrasmajorurbandistrictsalsoexperienced a

relativelylargedeclineinpercapitaGDP.ThusthecrisisseemstohaveadverselyaffectedSumatrasurbanareas,asdidthoseofJavaBali.

Download






NOTES* TakahiroAkita, International Develop-

mentProgram,International Universityof Ja pa n, Yamato-machi, MinamiUonuma-gun,Niigata949 -7277,Japan;

e-

mailaddress:[email protected]; ArmidaS.Alisjahbana,DepartmentofEconom-icsandDevelopment Studies,FacultyofEconomics, Padjadjaran University,Bandung, Indonesia.Th e authors ar egratefulto theInternational UniversityofJapan and theJapanSociety for thePromotionofScience(Grant-in-Aid forScientificResearch No. 12630073) fortheir financial support, and toanony-

mous referees for their helpful com-ments.

1 W il li am so n (1965) introduced theweightedcoefficient of variation (thecoefficient of variation weighted bypopulation)as a measure of regionalincomeinequality. Thelargeincreaseinthecoefficient betweenthe198593 andthe199397periodsisduesolelytothe

change inbaseyear forconstant priceestimatesbetweentheseperiods.2 TheseincludeAkitaandLukman(1995);

Esmara (1975); Garcia Garcia a ndSoelistianingsih(1998);andUppalandBudionoSriHandoko(1986).

3 Aninequalityindexissaidtobeaddi-tivelydecomposable if total inequalitycanbewrittenas thesumofbetween-group and within-group inequalities.

Mean independence implies that theindex remains unchanged if everyregionsincomeischangedbythesameproportion, while population-size in-dependence indicatesthattheindexre-mains unchanged if th e number ofpeopleineachregionischangedbythesameproportion, i.e.theindexdependsonlyontherelativepopulation frequen-ciesineachregionandnotontheabso-lutepopulationfrequencies. Finally,thePigouDaltonprincipleoftransfersim-plies thatan y income transfer fromarichertoapoorerregion thatdoesnotreverse theirrelativeranks in incomereducesthevalueoftheindex.

4 InFak-Fak,non-oilandgasminingac-countsformorethan90% oftotalGDP.

5 ForIrianJayasFak-Fakdistrict,non-oilandgasminingisalsoexcluded,forthesamereasonastheoilandgassectors.

6 For an unknown reason, WestJava sGDP isshownasmuchlargerinGross

RegionalDomesticProduct ofRegencies/Municipalities inIndonesiathan inGrossRegionalDomesticProductofProvincesinIndonesia. Forexample,WestJavasnon-oilandgasGDPin1997wasRp76,150billion in the district (regency/muni-cipality) statistics (BPS 2000a), butRp68,010 billion in theprovincialsta-tistics (BPS2000b). Inotherprovinces,thediscrepancy issignificantly smaller

overthe199397period(allarewithin3%ofeachother).

7 IfprovincialGDPdataareused,thede-clineis13.9%(BPS2000b).

8 Sinceweuseonly1998data,careshouldbe taken in interpreting th e results.District-levelGDPdatafor1999werenotavailableat the timeofwriting,sowedonotknowwhetherthewithin-prov-ince inequality component fell orrosein that year. But regional income in-equalityasmeasuredonthebasisofpro-vincialGDPdata (BPS2000b)declinedfurther in1999,mainlybecauseof thefall in thebetween-province inequalitycomponent.

9 The1997 figureforEastJavasGDP inGrossRegionalDomesticProductofRegen-cies/MunicipalitiesinIndonesiawassmaller

thanthatinGrossRegionalDomesticProd-uctofProvincesinIndonesia(Rp62,815vsRp 64,259 billion); in1998 the formerbecame larger (Rp56,606vsRp53,825billion) (BPS2000a,2000b). Therefore,therateofdeclineinGDPappearsmuchsmallerwhenthestatisticsofregencies/municipalities are usedthanwhenpro-vincialstatisticsareused(10%vs16%).

10 The industry-mix shift componentex-

plains thatpart of thegrowth differ-encethatisduetothedifferenceinthecomposition ofindustriesbetweentheregion an d the nation, w h e r e th egrowth difference is total regionalgrowth minus regional share of na -tional growth. The competitive shiftcomponent explains that part of th e

Download






growthdifference that is due to thedifference in th e growth rates of in-dustries between th e region and th enation.

11 Thisistrueeventhoughtheagricultural

sectorsinWestandEastJavacontractedby7.6%and5.0%,respectively,bothofwhichratesexceededthe2.6%negative

growthrateintheagricultural sectorofthecountryasawhole.

12 Householdexpenditure data from theNational Socio-EconomicSurveys (Su-senas)also indicatean increase in in-

equality,asmeasuredbyTheil indicesand theGini coefficient, between1993and1996(AkitaandSzeto2000).

REFERENCESAkita, T. (2002), Decomposing Regional

IncomeInequalityinChinaandIndonesiaUsingTwo-StageNestedTheilDecom-positionMethod,TheAnnalsofRegional

Science, forthcoming.Akita,T.,andAgusHermawan(2000),The

Sources of Industrial Growth in Indo-nesia,198595:AnInput-OutputAnaly-sis,ASEANEconomicBulletin 17 (3):27084.

Akita,T.,andR.A.Lukman(1995),Interre-gional Inequalities i n Indonesia: ASectoral Decomposition Analysis for197592,Bulletinof IndonesianEconomic

Studies31(2):6181.Akita,T.,andR.A.Lukman(1999),Spatial

PatternsofExpenditure Inequalities inIndonesia,1987,1990and1993,Bulletinof IndonesianEconomic Studies 35 (2):65-88.

Akita, T., R.A. Lukman and Y. Yamada(1999),InequalityintheDistribution ofHouseholdExpenditures inIndonesia:A

TheilDecomposition Analysis,TheDe-velopingEconomies37(2):197221.Akita,T.,andJesseJ.K.Szeto(2000),Inpres

DesaTertinggal (IDT)Programand In-donesianRegionalInequality,Asian Eco-nomicJournal14(2):16786.

Anand, S. (1983), Inequalityand Poverty inMalaysia:Measurement andDecomposition,AWorldBankResearchPublication, Ox-fordUniversityPress,NewYork.

Armstrong,H.W.,andJ.Taylor(1985),Re-gionalEconomics andPolicy, Blackwell,London.

Booth,A.(2000),TheImpactoftheIndone-sian Crisis on Welfare: What Do WeKnowTwoYearsOn?, inC.ManningandP.va nDiermen (eds), Indonesia inTransition: SocialAspectsofReformasiand

Crisis,InstituteofSoutheastAsianStud-ies,Singapore:14562.

Bourguignon, F.(1979),DecomposableIn-comeInequalityMeasures,Econometrica

47(4):90120.BPS(1996),GrossRegionalDomesticProductof

ProvincesinIndonesiabyIndustrialOrigin,19931995,Jakarta.

BPS(1997a),GrossRegionalDomesticProductofProvinces in IndonesiabyExpenditure,19931996,Jakarta.

BPS(1997b),GrossRegionalDomesticProductofRegencies/Municipalities in Indonesia,19931995,Jakarta.

BPS(1998a),GrossRegionalDomesticProductofRegencies/Municipalities in Indonesia,19941997,Jakarta.

BPS(1998b),GrossRegionalDomesticProductofProvincesinIndonesiabyIndustrialOri-gin,19941997,Jakarta.

BPS(1999),GrossRegionalDomesticProductofProvincesinIndonesiabyExpenditure,19951998,Jakarta.

BPS(2000a),GrossRegionalDomesticProductofRegencies/Municipalities in Indonesia,19951998,Jakarta.

BPS(2000b),GrossRegionalDomesticProductofProvincesinIndonesiabyIndustrialOri-gin,19961999,Jakarta.

BPS (2001),Statistical Yearbookof Indonesia2000,Jakarta.

Ching, P. (1991), SizeDistribution of In-comeinthePhilippines,inT.Mizoguchi

(ed.),MakingEconomiesMoreEfficientandMoreEquitable:FactorsDetermining IncomeDistribution,KinokuniyaCompanyLtd,Tokyo:15778.

Esmara,H.(1975),RegionalIncomeDispari-ties,BulletinofIndonesianEconomicStud-ies11(1):4157.

Download






Estudillo,J.(1997),IncomeInequalityinthePhilippines, 196191,TheDevelopingEconomies35(1):6895.

GarcaGarca,J., an dL. Soelistianingsih(1998),WhyDoDifferences inProvincial

IncomePersist inIndonesia?,BulletinofIndonesianEconomicStudies34(1):95120.Glewwe,P.(1986),TheDistribution ofIn-

comeinSriLankain196970and198081:ADecomposition Analysis,JournalofDevelopment Economies24(2):25574.

Ikemoto,Y.(1985),IncomeDistribution inMalaysia:195780,TheDevelopingEcono-mies23(4):34767.

Je nk ins, S.P. (1995), Accounting for In -

equalityTrends:DecompositionAnaly-si s for the UK ,197186,Economica62(246):2963.

Mookherjee, D.,andA.Shorrocks(1982),ADecomposition AnalysisoftheTrendinUKIncomeInequality,TheEconomicJour-nal92(367):886902.

Shorrocks,A.F.(1980),TheClassofAddi-tively Decomposable Inequality Me a-sures,Econometrica 48(3):61325.

Tsakloglou,P.(1993),AspectsofInequal-ityinGreece:Measurement,Decompo-

sitionand IntertemporalChange,1974,1982,JournalofDevelopment Economics40(1):5374.

Tsui,K.Y.(1993),DecompositionofChinasRegionalInequalities,JournalofCompara-tiveEconomics17(3):60027.

Uppal,J.S.,andBudionoSriHandoko(1986),Regional IncomeDisparities in Indo-nesia,EkonomidanKeuanganIndonesia34(3):286304.

Williamson,J.G.(1965),RegionalInequal-ityand the Process ofNationalDevel-opment:ADescriptionofthePatterns,EconomicDevelopment andCulturalChange13(4):345.

Download






APPENDIX

1:

TWO-STAGENESTEDINEQUALITY

DECOMPOSITION

METHOD

This appendix presents the two-stagenestedinequalitydecompositionmethod,

anextensionoftheone-stagemethodofinequalitydecomposition (Anand1983).Numerousstudieshaveusedthelattertoanalysefactorsdeterminingincomein-equality, but most have applied it toanalysisofinterpersonal orinterhouse-

holdincomeinequality(see,forexample,AkitaandLukman1999;Akita,Lukman

andYamada1999;AkitaandSzeto2000;Anand1983;Ching1991;Estudillo1997;Glewwe 1986; Ikemoto 1985;Jenkins1995;Mookherjee andShorrocks1982;Tsakloglou 1993;andTsui1993).

Weconsiderthefollowinghierarchi-cal structure of a country: regionprovincedistrict.Withadistrictastheunderlying regional unit, overall re -

gional income inequalitycanbemea-suredbythefollowingTheilindex(TheilindexT).

Nn

Yy

Y

yT

ijk

ijk

i j k

ijkd log= , (1)

whereyijkistheincomeofdistrictkinprov-

incejinregioni;

Y is the total income of all districts

= yijkk

j

i

;

nijkisthetotalpopulationofdistrictk

inprovincejinregioni;andN isthe totalpopulationof alldis-

tricts = nijkk

j

i

.

IfwedefineTdi asfollowstomeasure

between-districtincomeinequalityforre-gioni,

i

ijki

ijk

j k i

ijkdi

Nn Y

y

Y

yT log= , (2)

then Tdinequation(1)willbedecom-

posedinto

BRdii

i

i

i

i

idi

i

id

TTY

YN

NY

Y

Y

YT

Y

YT

+

=

+

=

log

(3)

where

Yi is the total income of region i

= y ijkk

j

;

Ni isthetotalpopulationofregioni

= nijkk

j

;and

=

NN

YY

Y

YT

i

i

i

iBR log

measuresincomeinequalitybetweenre-

gions.Therefore,theoverallregionalincome

inequalityTd isthesumofthewithin-

region component and the between-region component. Equation (3) is theordinaryone-stageinequalitydecompo-sitionequation.

Next,ifwedefineTijasfollowstomea-

surewithin-provinceincomeinequalityforprovincejinregioni,

ij

ijk

ij

ijk

k ij

ijkij

Nn

Yy

Y

yT log=

,

Download






then diT inequation(2)canbefurther

decomposedinto

piijj i

ij

i

ij

i

ij

j i

ijij

j i

ijdi

TTY

Y

NN

Y

Y

YYT

YYT

+

=

+

=

log

(4)

whereYij isthetotalincomeofprovincejin

regioni = yijkk

;

Nij isthetotalpopulationofprovince

jinregioni = nijkk

;and

=

i

iji

ij

j i

ijpi

NN Y

Y

Y

YT log

measures income inequality betweenprovincesinregioni.

Bysubstituting Tdi inequation(4)into

equation(3),weobtain:

BRBPWP

BRpii

iij

i j

ij

BRj

piiji

ij

i

id

TTT

TTY

YT

Y

Y

TTTY

Y

Y

YT

++=

+

+

=

+

+

=

(5)

Equation(5)isthetwo-stagenestedin-

equality decomposition equation, inwhichoverallregionalincomeinequalityis decomposed into the within-provincecomponent(T

WP),thebetween-

province component (TBP

), and thebetween-region component (T

BR). The

within-provincecomponentisaweightedaverage of within-province income in-equalities(T

ij),whilethebetween-province

componentisaweightedaverageofbe-tween-provinceincomeinequalities(T

pi).

APPENDIX

2:

SHIFT

AND

SHARE

ANALYSIS

Shiftandshareanalysisisatechniquethathasbeenwidelyusedtoexaminethefactorsdetermining regionalgrowth(see,forexample,ArmstrongandTay-lor1985).Itdividesaregionsgrowthintothreecomponents.Thefirstistheregionsshareofnationalgrowth(RS).Ifaregiongrowsatthenationalaveragerate,itwillmaintainitsshareofnational

output.Theformulaforcalculating RSforaparticularsectorcanbeexpressedinthefollowingway:

D=

N

Nii

E

EeRS ,

where

e i

=regionaloutputinsectoriatthebeginningoftheperiod;

EN=totalnationaloutputatthebegin-ningoftheperiod;and

DEN = the change in total nationaloutput.

Thesecondcomponent,theindustry-mixshiftcomponent(IMS),isbasedonthepremisethataregionthathasarela-

tivelylargershareofoutputinfast-

grow-

ingindustriesshouldgrowfasterthanthenationasawhole.IMSforasinglesectorcanbedefinedas:

D-

D=

N

N

i

iii

E

E

E

EeIMS

Download






whereEi =nationaloutputinsectoriatthe

beginningoftheperiod;andDEi=thechangeinnationaloutputin

sectori.The third component is called the

competitive shiftcomponent(CS).Are-gionmayhaveacompetitive advantageinsomeindustriesrelativetootherre-gionsbecauseitsenvironment iscondu-civetothegrowthoftheseindustries.CSforasinglesectorcanbedefinedas:

D

-

D

= ii

i

i

ii E

E

e

e

eCS ,

whereDe i =thechangeinregionaloutputin

sectori.Theoutputgrowthofaparticularsec-

tor(sectori)ofaregion,De i ,isnowgiven

asthesumofthesethreecomponents:

D-D+

D-D+

D=++=D

i

i

i

ii

N

N

i

ii

N

Niiiii

E

E

e

ee

E

E

E

Ee

E

EeCSIMSRSe

whilethetotaloutputgrowthofaregionisgivenby

D-

D+

D-

D+

D=

++=D

=

==

==

i

i

i

in

ii

N

N

i

in

ii

N

Nn

ii

n

iiii

n

ii

E

E

e

ee

E

E

E

E

eE

E

e

CSIMSRSe

1

11

11

)(

wheren=thenumberofindustries.

Download



bulletin of indonesian economic studies volume 38 issue 2 2002 [doi 10.1080%2f000749102320145057]...

Documents