Premature Structural Transformation and Income Inequality in Pre and Post Commodity Boom Period in Indonesia
DOI:
https://doi.org/10.32628/IJSRSET2073123Keywords:
dynamic panel, commodity boom, income inequality, trade, premature structural transformationAbstract
Since 2000, Indonesia had been confronted with the problem of increasing income inequality between the poor and rich. At the same time, there was a shift change in the economic structure. That was the decrease in the contribution of manufacturing sector which was replaced by services sector and the increase in raw material export due to the jump in commodity prices. This study aims to measure the determinants of inequality from the employment side in the form of structural transformation and the economic openness side in the form of trade and investment. By using a dynamic panel model, it is known that the increase on trade openness has a significant effect on the reducing of income inequality, but its effect has diminished in the commodity boom period. Meanwhile, the structural transformation from the agricultural sector to the services sector has contributed a significant role in reducing inequality.
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