Regional Inequality of Indonesia in 1996 and 2006: Quantile Regression Analysis

Objectives of this paper are to compare regional inequality in 1996 and 2006, to see influence of socio demographic characteristics to this inequality and to observe if the influence of socio demographic characteristics is varied in different level of income. We explain some factors such as financial crises, fiscal decentralization and increasing of oil price may have changed pattern of regional inequality in Indonesia from 1996 to 2006. Specifically we employ quantile regression to examine the influence and its heterogeneity across point of distribution between and within regions in both years. Our finding show socio demographic variables and job sectors are significant to influence the inequality across regions in both years. Smaller difference in the coefficients the returns of the examined variables in this paper confirmed there is a tendency small decreasing of the regional inequality over the periods. Even though these variables are insignificant in all quantile but this findings support our hypothesis that the variables influence the inequality differently in different point of distribution.