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Empirical analysis reveals FDI and GDP per capita worsen inequality in ASEAN, indicating urgent policy interventions.
This study investigates the impact of economic integration on regional development inequality across ASEAN member states during the 2019–2024 period. Employing a panel data model, the dependent variable—regional inequality index (Hoover and Theil Index)—is examined against key independent variables: Foreign Direct Investment (FDI), GDP per capita, Human Development Index (HDI), and Fiscal Equalization Funds. The findings reveal that FDI (+0.042) and GDP per capita (–0.065) contribute to widening spatial disparities, indicating growth concentration in core economic regions. In contrast, HDI (–0.031) and Fiscal Equalization Funds (–0.048) exert a significant mitigating effect on inequality, underscoring the role of human development and fiscal redistribution. These results align with the backwash effect theory and the Kuznets curve, suggesting that economic growth without spatial intervention risks exacerbating interregional disparities. The study recommends policy strategies such as decentralized industrial clustering, regionally targeted investment incentives, and enhanced interregional connectivity to promote more inclusive and equitable development.
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Benius et al. (2025) studied this question.
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