Regional Inequality and Development: Measurement and Applications in Indonesia

208 Pages·2022·4.302 MB·English

by  Takahiro Akita, Mitsuhiko Kataoka

New Frontiers in Regional Science: Asian Perspectives 63
Takahiro Akita
Mitsuhiko Kataoka
Regional
Inequality and
Development
Measurement and Applications in
Indonesia
New Frontiers in Regional Science: Asian
Perspectives
Volume 63
Editor-in-Chief
YoshiroHigano,UniversityofTsukuba,Tsukuba,Ibaraki,Japan
Thisseriesisaconstellationofworksbyscholarsinthefieldofregionalscienceand
inrelateddisciplinesspecificallyfocusingondynamisminAsia.
Asiaisthemostdynamicpartoftheworld.Japan,Korea,Taiwan,andSingapore
experiencedrapidandmiracleeconomicgrowthinthe1970s.Malaysia,Indonesia,
and Thailand followed in the 1980s. China, India, and Vietnam are now rising
countries in Asia and are even leading the world economy. Due to their rapid
economic development and growth, Asian countries continue to face a variety of
urgentissuesincludingregionalandinstitutionalunbalancedgrowth,environmental
problems, poverty amidst prosperity, an ageing society, the collapse of the bubble
economy,anddeflation,amongothers.
Asian countries are diversified as they have their own cultural, historical, and
geographicalaswellaspoliticalconditions.Duetothisfact,scholarsspecializingin
regional science as an inter- and multi-discipline have taken leading roles in pro-
viding mitigating policy proposals based on robust interdisciplinary analysis of
multifaceted regional issues and subjects in Asia. This series not only will present
unique research results from Asia that are unfamiliar in other parts of the world
because of language barriers, but also will publish advanced research results from
thoseregionsthathavefocusedonregionalandurbanissuesinAsiafromdifferent
perspectives.
The series aims to expand the frontiers of regional science through diffusion of
intrinsically developed and advanced modern regional science methodologies in
Asia and other areas of the world. Readers will be inspired to realize that regional
and urban issues in the world are so vast that their established methodologies still
havespacefordevelopmentandrefinement,andtounderstandtheimportanceofthe
interdisciplinary andmultidisciplinary approachthatisinherent inregionalscience
foranalyzingandresolvingurgentregionalandurbanissuesinAsia.
Topics under consideration in this series include the theory of social cost and
benefit analysis and criteria of public investments, socio-economic vulnerability
against disasters, food security and policy, agro-food systems in China, industrial
clusteringinAsia,comprehensivemanagementofwaterenvironmentandresources
in a river basin, the international trade bloc and food security, migration and labor
marketinAsia,landpolicyandlocalpropertytax,InformationandCommunication
Technology planning, consumer “shop-around” movements, and regeneration of
downtowns,amongothers.
Researchers who are interested in publishing their books in this Series should
obtainaproposalformfromYoshiroHigano(EditorinChief,[email protected])and
returnthecompletedformtohim.
(cid:129)
Takahiro Akita Mitsuhiko Kataoka
Regional Inequality
and Development
Measurement and Applications in Indonesia
TakahiroAkita MitsuhikoKataoka
IUJResearchInstitute GraduateSchoolofBusiness
InternationalUniversityofJapan RikkyoUniversity
Niigata,Japan Tokyo,Japan
ISSN2199-5974 ISSN2199-5982 (electronic)
NewFrontiersinRegionalScience:AsianPerspectives
ISBN978-981-19-2967-0 ISBN978-981-19-2968-7 (eBook)
https://doi.org/10.1007/978-981-19-2968-7
©TheEditor(s)(ifapplicable)andTheAuthor(s),underexclusivelicensetoSpringerNatureSingapore
PteLtd.2022
Thisworkissubjecttocopyright.AllrightsaresolelyandexclusivelylicensedbythePublisher,whether
thewholeorpartofthematerialisconcerned,specificallytherightsoftranslation,reprinting,reuseof
illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and
transmission or information storage and retrieval, electronic adaptation, computer software, or by
similarordissimilarmethodologynowknownorhereafterdeveloped.
Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication
doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant
protectivelawsandregulationsandthereforefreeforgeneraluse.
The publisher, the authors and the editors are safe to assume that the advice and information in this
bookarebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor
theeditorsgiveawarranty,expressedorimplied,withrespecttothematerialcontainedhereinorforany
errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional
claimsinpublishedmapsandinstitutionalaffiliations.
ThisSpringerimprintispublishedbytheregisteredcompanySpringerNatureSingaporePteLtd.
The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721,
Singapore
Acknowledgments
A number of people have helped us in gathering the data which made this book
possible.Wewouldliketothankallofthem.WeareespeciallygratefultoArmida
SalsiahAlisjahbana,PujiAgusKurniawan,RizalAffandiLukman,CarlosMendez,
andSachikoMiyatafortheirsupportsandstimulatingsuggestionsinwritingsomeof
the chapters. We also gratefully acknowledge the financial support of the Japan
Society for the Promotion of Science (Grant-in-Aid for Scientific Research
17K03723,18K01589,and26380308).
TakahiroAkita,ProfessorEmeritus,InternationalUniversityofJapan
MitsuhikoKataoka,Professor,RikkyoUniversity
v
Contents
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 Preliminaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 ContentsoftheBook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PartI MeasurementandAnalysisofRegionalInequality
2 MeasurementofRegionalInequality. . . . . . . . . . . . . . . . . . . . . . . . . 11
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2 MeasuresofInterpersonalInequality. . . . .. . . . . . . . .. . . . . . . . .. 13
2.1 StandardDeviation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 CoefficientofVariation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 FormalDefinitionofMeasuresofInequality. . . . . . . . . . . . . . 18
2.4 LorenzCurve. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.5 GiniCoefficient. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.6 GeneralizedEntropyClassofMeasuresandTheilIndices. . . . 24
2.7 OtherRelativeInequalityMeasures. . . . . . . . . . . . . . . . . . . . 25
3 DecomposableInequalityMeasures. . . . . . . . . . . . . . . . . . . . . . . . 26
3.1 InequalityDecompositionbyPopulationSubgroups. . . . . . . . 26
3.2 InequalityDecompositionbyIncomeSourcesorFactor
Components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4 UrbanizationandKuznetsProcess. . . . . . . . . . . . . . . . . . . . . . . . . 37
5 MeasuresofRegionalInequality. . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.1 ContributionofBetween-regionInequalitytoOverall
InterpersonalIncomeInequality(Type1Measure). . . . . . . . . 42
5.2 Population-WeightedCoefficientofVariation
(Type2Measure). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.3 Population-UnweightedCoefficientofVariation(Type3
Measure). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.4 TheilIndicesasMeasuresofRegionalInequality. . . . . . . . . . 49
vii
viii Contents
6 RegionalConvergence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7 SomeUsefulStataCommands. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Appendix1:GeometricDefinitionoftheGiniCoefficient(Eq.2.3). . . . 62
Appendix2:SomePropertiesoftheNaturalLogarithmFunction. . . . . . 62
Appendix3:RelationshipBetweenE andCV2(Eq.2.10). . . . . . . . . . 64
2
Appendix4:OtherRelativeInequalityMeasures. . . . . . . . . . . . . . . . . . 64
Appendix5:InequalityDecompositionbyPopulationSubgroups. . . . . . 66
Appendix6:DecompositionbyPopulationSubgroups:Generalized
EntropyClassofMeasures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Appendix7:InequalityDecompositionbyIncomeSources. . . . . . . . . . 68
Appendix8:KuznetsProcessofUrbanization(Eqs.2.23and2.26). . . . 69
Appendix9:NeoclassicalGrowthModel(SolowGrowthModel). . . . .. 71
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
3 AnalysisofRegionalInequality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
2 BidimensionalInequalityDecompositionAnalysis. . . . . . . . . . . . . . 79
2.1 DecompositionoftheSquaredCoefficientofVariationby
Regions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
2.2 DecompositionoftheSquaredCoefficientofVariationbyGDP
Components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
2.3 BidimensionalInequalityDecompositionEquationbasedonthe
CoefficientofVariation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
2.4 Bi-dimensionalInequalityDecompositionEquationbasedonthe
Population-weightedCoefficientofVariation. . . . . . . . . . . . . 89
3 SectoralInequalityDecompositionAnalysis. . . . . . . . . . . . . . . . . . 93
4 Two-stageNestedTheilDecompositionAnalysis. . . . . . . . . . . . . . 99
5 FactorDecompositionAnalysisofRegionalIncomeInequality. . . . . 106
Appendix1:DecompositionoftheSquaredCoefficientofVariationby
Regions(Eq.3.2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Appendix2:DecompositionoftheSquaredCoefficientofVariationby
GDPComponents(Eqs.3.9and3.10). . . . . . . . . . . . . . . . . . . . . . . . . 111
Appendix3:BidimensionalInequalityDecompositionEquationbasedon
theSquaredCoefficientofVariation(Eq.3.13). . . . . . . . . . . . . . . . . . . 112
Appendix4:BidimensionalInequalityDecompositionEquationbasedon
thePopulation-weightedCoefficientofVariation(Eq.3.16). . . . . . . . . . 113
Appendix5:SectoralInequalityDecompositionEquation(Eqs.3.22and
3.25). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Appendix6:DecompositionofTheilTbyRegion(Eqs.3.29,3.30,and
3.31). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Contents ix
PartII AnalysisofRegionalInequality:Applications
4 EconomicTertialization,OutputDeindustrialization,andIncome
InequalityinIndonesia:ABidimensionalInequalityDecomposition
Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
2 LiteratureReview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
3 DataandMethod. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .. . . . 128
3.1 Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
3.2 BidimensionalInequalityDecompositionMethod. . . . . . . . . . 128
4 EmpiricalResults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
4.1 LevelandTrendofInequalityinPerCapitaGDP. . . . . . . . . . 130
4.2 RegionalConvergenceinPerCapitaGDP. . . . . . . . . . . . . . . 131
4.3 InequalitiesinPerCapitaGDPbyIndustrialSectors. . . . . . . . 133
4.4 BidimensionalDecompositionAnalysis. . . . . . . . . . . . . . . . . 135
5 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
5 StructuralChangesandRegionalIncomeInequalityintheIndonesian
ManufacturingIndustry:AnInequalityDecompositionAnalysis. . . 141
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
2 DataandMethods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
2.1 Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
2.2 Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
3 Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
3.1 ProvincialGrowthinManufacturingGDPBetween2010and
2019:AShiftandShareAnalysis. . . . . . . . . . . . . . . . . . . . . . 147
3.2 LevelsandTrendsofInter-provincialInequalitiesinGDP
Between2010and2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
3.3 IdentifyingInequality-ReducingandInequality-Raising
ManufacturingSubsectors:AnInequalityDecomposition
AnalysisbytheCVandGiniCoefficient. . . . . . . . . . . . . . . . . 155
3.4 DeterminantsofInter-provincialInequalityinManufacturing
GDP. .. . . .. . . . .. . . .. . . . .. . . .. . . . .. . . .. . . .. . . . .. 159
4 ConcludingRemarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
6 TheImpactofthe1997EconomicCrisisonIncomeInequalityin
Indonesia:ATwo-StageNestedTheilDecompositionAnalysis. . . . . 163
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
2 DataandMethods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
2.1 Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
2.2 Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
3 Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
3.1 IncomeInequalitybeforetheEconomicCrisis. . . . . . . . . . . . . 168
3.2 TheImpactoftheEconomicCrisisonIncomeInequality. . . . . 173
4 ConcludingRemarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
x Contents
7 Inter-provincialInequalityinLaborProductivityandEfficiencyin
Indonesia:AFactorDecompositionAnalysis. . . . . . . . . . . . . . . . . . 181
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
2 DataandMethods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
2.1 Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
2.2 Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
3 Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
3.1 MeasuringConventionalandBias-correctedRelativeEfficiency
byProvince. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
3.2 ExploringtheSourcesofInter-provincialInequalityinLabor
Productivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
4 ConcludingRemarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202