The Role of Inequality, Diversity, and Social Capital towards Incidence of Crime and Conflict Panel Data Analysis from 313 Villages in Indonesia

Developing countries are often hurdled with conflict or crime that impedes so-cial cohesion and therefore hindering them to grow. Many literatures have dis-cussed its cause but the consensus is yet to be reached. Moreover, numerous studies focus on the economic and diversity aspect but not a lot is paying atten-tion to social capital. This research tries to contribute to the discussion by ana-lysing the causes of conflict and crime from 313 village level data that represents 83% of the population in Indonesia considering three variables: vertical inequal-ity proxied by poverty rate, social diversity in terms of ethnicity and religion, as well as social capital. With panel data regressions, this paper found that income inequality is to certain extent able to explain the increase of the number of inci-dence of theft, robbery, and conflicts in relation to land and building. Further-more, the lack of social capital is shown to be positively correlated with increas-ing incidence of crime such as sexual assault. In contrast, there is no strong evidence that social diversity plays a role in the increasing incidence. While the results are not meant to be generalized, from here one could infer that in order to reduce crime and conflict, it is worth for policy makers to address the root cause of income inequality, try to introduce community-based solution that en-courage social capital, and start seeing diversity as an asset instead of divider that triggers incidence.