Since its independence, Indonesia has experience a rapid and uneven economic growth. The financial
crisis in 1998 has led Indonesia to decentralisation with a new political and government budget order
in 2001. Researches found that the local government’s main expenditure are on routine spending, such
as wage and asset maintenance, not on the development spending.
Using macroeconomic data from 1993 to 2005, this paper aims to overview the inequality in Indonesia
regions before and after the decentralisation. The paper deploy a set of data on inter government fiscal
transfer, expenditure rate, and the level of revenue as a proxy variables to understand the effect to
inequality. In this paper we will overview the level of disparities by using various methods and also the
shifts of regional inequality over time. It is suggested that inequality level is still severe and
convergence rate has decrease throughout the decentralisation era. Impacts from inequality can be
detected although weak and fluctuated over time.
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