Patrizia Riganti (p), Michele Clarke

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Patricia C. Melo (p)

See extended abstract

Budy P. Resosudarmo (p)

This paper provides evidence of a causal relationship between economic growth in the manufacturing, agriculture and services sectors and income inequality, measured by an income equality variable, using panel data for Indonesian districts and cities over the period 2000 to 2010. The results show a negative and statistically significant impact of the manufacturing and services share of GDP on income equality; in other words, a positive impact of the manufacturing and services share of GDP on income inequality. The share of agriculture in GDP, however, shows a positive impact on income equality; i.e. a negative impact on income inequality. The effects are robust to the incorporation of education, employment, government spending, credit and quality of government covariates as control variables.