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This research aims to measure regional inequalities among the districts of Yogyakarta Special Province. Furthermore, it is necessary to analyze those factors which contribute to the disproportionate distribution of wealth among people, living in this region. This study is based on the statistical data, gathered within the period of 2000 and 2006. There are several questions that need to be addressed: namely, it is vital to understand what causes income discrepancies in the population. Secondly, it is essential to propose strategies that can possibly alleviate the situation in Yogyakarta Special Province. This paper consists of several sections:
- a literature review that examines the findings of those scholars who studied this issue;
- the second part explains the rationale for using Theil indexes as a method describing income disparities; furthermore, in this section, we are going to explore the concept of regional inequality and its types;
- the third part presents the analysis of statistical data as well as the key findings.
This topic has always attracted the close attention of sociologists and economists. Numerous studies have been carried out to identify the origins of inequality, measurement techniques, and methods to cope with this problem (Barro, 1999; Litchfield 1999. Kaasa, 2005). This question came under academic scrutiny in the middle of the twentieth century when it became clear that a large portion of the world population had lived and still lives beyond the line of poverty. At that moment scholars realized that this problem could no longer be disregarded and many landmark researches were conducted during that period (Robinson, 1976; Kuznets 1955). This paper is beneficial to the extent that it will help to identify and probably solve the problem of a specific district. The findings of this research can be of some importance to the Indonesian government which struggles now to improve living conditions in Yogyakarta Special Province. Furthermore, this research is useful as it contributes to the study of inequality in developing countries.
Disproportionate distribution of wealth among the Indonesian population has been thoroughly investigated by many economists and sociologists. For example, Takahiro Akita (2002) focuses on such sources of income disparities as age, education, gender, location (rural and urban setting). The author focuses on the discrepancies between and within the provinces (Akita, 2002, p 17). Similarly, this question will be addressed in this paper. Akitas work is of great assistance for this research as it clearly singles out the determinants of inequality in Indonesia. However, it should be kept in mind that this report is based on the information, gathered seven or even eight years ago, and since that time the situation could have changed. Apart from that, we should refer to the study by Emmanuel Skoufias et al (2000) who investigate the impacts of the financial crisis on wealth distribution patterns. In his opinion, the economic recession that broke out in the late nineties did not affect various layers of the society in the same way (Skoufias et al, 2000, p 113). This work is also extremely beneficial as it demonstrates how the cost of living in rural and urban areas may affect the distribution of wealth. This information is extremely relevant to this research because Yogyakarta Special Province comprises a great number of villages. On the whole, the differences, existing between the city and the village will be meticulously studied in this thesis. According to the study of Takahiro Akita and Rizal Lukman (1999), the level of rural inequality has significantly dropped in the early nineties, in particularly diminished from 0, 191 to 159, while urban inequality remained unchained (1999, p 78). The scholars measured inequality by the weighted coefficient in the variation of non-mining provincial GDP per capita (Akita & Lukman 1999, p 65). Overall, the vast majority of studies indicate that this region has one of the highest levels of inequality in the country (Akita & Lukman 1999; Huppi & Ravallion, 1991). Each of these works enables us to better understand the sources of inequality in the province. Moreover, they show the influence of the external environment on the distribution of income in the country.
However, we should emphasize the idea that since that time the state of affairs has undergone many transformations. First, we need to speak about the world economic crisis which produced profound effects on the economy of many countries including Indonesia. Secondly, one should not overlook the fact that in 2006 people, living in this region, fell victim to a destructive earthquake which led to immense civil casualties. Moreover, it practically ruined the infrastructure and economy of the island. Subsequently, this could have impacted the distribution of wealth. Besides, we intend to analyze the effects, brought by the change of political system in this region. In 2001 Yogyakarta Special Province received autonomy from the state and this could have affected the patterns of regional inequalities. These examples prove that the study of financial disparity in Indonesia and particularly in Yogyakarta Special Province should be further continued. This research attempts to enlarge scholarly knowledge of this problem.
Reference
Akita T. (2002). Income Inequality in Indonesia. IUJ Research Institute, pp 1-45.
Akita T & Lukman Rizal.(1995) “Interregional Inequalities in Indonesia A Sectoral
Decomposition” Analysis” Bulletin of Indonesian Economic Studies, vol., 31, pp 61-81.
Akita T & Lukman Rizal. (1999). Spatial Patterns of Expenditure Inequalities in
Indonesia: 1987, 1990, and 1993. Bulletin of Indonesian Economic Studies, vol. 35, issue 2, pp 65 -88.
Barro R. (1999) Inequality and Growth in a Panel of Countries. Harvard University.
Huppi M & Ravallion M. (1991) “The Sectoral Structure of Poverty During an Adjustment Period: Evidence for Indonesia in the Mid-1980s”. World’ Development, Vol. 19, No. 12, pp. 165S1678, 1991.
Kaasa A. 2005. Factors of Income Inequality and Their Influence Mechanisms: A Theoretical Overview: University of Tartu.
Kuznets S. (1955). “Economic Growth and Inequality”. The American Economic Review, vol. 14, pp 1-28.
Litchfield. J (1999). Inequality: Methods and Tools. World Bank. Web.
Robinson S. 1976. “A Note on the U Hypothesis Relating Income Inequality and Economic Development”. The American Economic Review, vol. 66, pp 437- 440.
Skoufias E. Suryahadi A & Sumarto S. “Changes in Household Welfare, Poverty and Inequality during the crisis”. Bulletin of Indonesian Economic Studies, vol 36. № 2, pp 97-114.
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