Spatial Patterns of Expenditure Inequalities in Indonesia: 1987, 1990 and 1993

This article investigates the contribution of inter-regional disparity to total national inequality in household expenditure, by decomposing national inequality into within- and between-province components. This is done by applying the Theil inequality decomposition technique to household expenditure data from the National Socio-Economic Survey. Whereas inter-provincial disparity accounted for 12–14% of total inequality among urban households and 7–8% among rural households, urban–rural disparity accounted for 22–24% of total national inequality. A Kuznets curve drawn according to the 1993 Susenas data indicates a peak inequality value of 0.27 (using Theil index T) when the share of urban households reaches 53.2%; this share is much larger than the actual 1993 urbanisation level of 32.1%. Further urbanisation is therefore likely to raise total inequality, even if other conditions remain stable.