Analysis of economic development and income inequality in Kedungsepur Strategic Area, Indonesia

Economic development aims to create equal income distribution, and the mature stages of growth will begin to prioritize the manufacturing sector's contribution as a lever for economic growth. This research aims to identify the transformation of sectoral contributions to gross regional domestic product (GRDP) examine the relationship between the contribution of the manufacturing sector, human development, labor force participation and population to income inequality. The case study was conducted in Kedungsepur strategic area in Central Java Province, Indonesia. This research uses a quantitative approach by testing the causal relationship between proxy variables of economic development and income inequality. The data used is secondary data obtained from the Central Bureau of Statistics (BPS) Indonesia. Panel data analysis tests the relationship between variables in economic development and the transformation of sectoral contributions presented descriptively. The results of this research show the transformation of sectoral contributions to Gross Regional Domestic Product (GRDP) in the Kedungsepur strategic area began in 2010. The manufacturing sector dominates the contribution to GRDP, shifting the agricultural sector's contribution. This condition reveals that the Kedungsepur strategic area has reached the mature stages of growth. Panel data analysis shows that the manufacturing sector's contribution positively affects income inequality. Labor force participation and population growth has a significant negative relationship with income inequality. This research can contribute to local government policy recommendations in which manufacturing sector contributions should not only be a lever for economic growth but also create equal income distribution. Furthermore, human development is also a central element in economic development that must be developed.