Open AccessInequality and Economic Growth in Indonesia in The 2000’s
Author(s) -
Damayanti Simangunsong,
Kuang-hui Chen
Publication year - 2018
Publication title -
signifikan
Language(s) - English
Resource type - Journals
eISSN - 2476-9223
pISSN - 2087-2046
DOI - 10.15408/sjie.v7i2.6177
Subject(s) - economics , inequality , economic inequality , generalized method of moments , panel data , decentralization , estimator , government (linguistics) , econometrics , demographic economics , development economics , mathematics , statistics , market economy , mathematical analysis , linguistics , philosophy
The income inequality in Indonesia reached the highest level during the decentralization era and suspected to be the cause of the slowdown of the economic growth in the last five years to 2015. This paper investigates whether increasing inequality had a positive or negative impact on economic growth in Indonesia. Using dynamic panel and applying Generalized Method of Moments (GMM) estimator, the result concluded that there is a significant positive relationship between income inequality and economic growth. However, this study cannot draw a definite conclusion about the association for the different classes (bottom, middle, and top level) since only one-step system GMM is significant. Based on the result, it implies that the government should be more careful in regulating the inequality policy and understand more about the right mechanism of inequality and economy growth.DOI: 10.15408/sjie.v7i2.6177