Entrepreneurship and income distribution in Indonesia: time-series evidence

Purpose This study aims to examine the effects of entrepreneurship, economic growth, trade openness, financial development, human capital and labor force participation on income inequality in Indonesia. It aims to determine whether entrepreneurship promotes inclusive growth or intensifies disparities, with reference to Indonesia’s Vision 2045 agenda. Design/methodology/approach Annual time-series data from 1990 to 2024 are analyzed using the autoregressive distributed lag model to estimate both short- and long-run dynamics. Robustness is confirmed through fully modified ordinary least squares and dynamic ordinary least squares, complemented by diagnostic and stability tests. The study adopts the Toda–Yamamoto Granger noncausality test to test the causality between the variables as a final test to enrich the outcomes. Findings Results indicate that entrepreneurship (ENT), financial development (FD) and labor force participation (LAB) increase inequality in the long run, while economic growth, trade openness (TO) and human capital (HC) reduce disparities (GINI). In the short run, GDP growth and human capital act as strong equalizers, whereas entrepreneurship exerts only a weak effect. These findings suggest that without equity safeguards, entrepreneurial and financial growth disproportionately benefit wealthier groups. Research limitations/implications The study relies on national data, which may obscure regional variations and differences between necessity- and opportunity-driven entrepreneurship. Practical implications Equitable micro, small and medium enterprise financing, digital integration, vocational education and labor protections are essential to make entrepreneurial and financial development more inclusive. Social implications Strengthening inclusive entrepreneurship, equitable financial systems and human capital investment will help Indonesia achieve sustainable, socially equitable growth toward Vision 2045. Originality/value To the best of the authors’ knowledge, the paper provides one of the first Indonesia-specific long-term time-series assessments of the entrepreneurship–inequality nexus. By integrating multiple macroeconomic drivers, it offers original empirical insights for balancing growth and equity in an emerging economy.