A sectoral growth-income inequality nexus in Indonesia

This paper provides evidence of strong associational effects between economic growth in the manufacturing, agriculture, mining and services sectors and income inequality, measured by an income equality variable, using panel data for Indonesian districts and cities over the period 2000 to 2010. The results show a significantly positive impact of both manufacturing and services shares of GDP on income inequality. The share of agriculture in GDP, however, shows a significantly negative impact on income inequality. The effects are robust to the incorporation of control variables, making a case for considering sectoral differences in policy targeting for achieving inclusive growth.