Improving Government Policy on Regional Inequality Reduction in Indonesia
Regional inequality has been an unresolved issue in Indonesia, despite the currently implemented government
policy. Inequality caused some problems like the drain of regional resources which resulted in secessionist movement.
Therefore, there is a need to investigate the policy effectiveness on reducing regional inequality. By using the coefficient of
variation (CV), it was observable that although there has been a slight decrease in inequality between provinces, it is still at a
high level compared to other developing countries. Furthermore, by conducting an empirical analysis, the study found a
slight convergence on regional growth, suggesting a trend of decreasing growth inequality. Moreover, several variables
which affect regional growth, thus reduce regional inequality, are average schooling years, asset expenditure, government
transfer, and dummies on government regulation. Based on the findings, it is important for the government to improve its’
policies in addressing regional inequality. By focusing regional resources which are gained from government transfer as well
as local region revenues towards the provision of education facilities and its supporting infrastructures, regional growth in
less developed regions can be improved which in turn reduces regional growth inequality.
Keywords- regional; inequality; growth; decentralization; policy; education; transfer; infrastructure