Factors Affecting Regional Disparities in Indonesia 1985-2015

Abstract

Indonesia’s economic development is intended to increase the country’s people welfare, but its disconnection to equality principle causes regional disparities. This research aims to reveal the factors which influence regional disparities and to analyze the impact of economic growth, investment, unemployment, allocation of government fund and economic crisis on regional disparities in Indonesia. Using quantitative and qualitative methods and data from 1985 to 2015, it concludes that from the year 1985 to 2015, regional disparities in Indonesia are high which is indicated by the Williamson Index. Based on the result of the research, it is concluded that from several analyzed variables, it is only variable of government fund allocation which have negative impact on regional disparities in Indonesia during 1985-2015. The other four variables; economic growth, investment, unemployment and dummy have are negative. Therefore in the future government of Indonesia should pay more attention to the implementation of allocating government fund for regional government in order to be able to create a good quality of economic growth. The Government of Indonesia should also implement equality in term of creating job opportunity, investment privilege so that those efforts are expected to lessen disparities among regions in Indonesian.

Keywords: regional disparity, economic growth, allocation of government fund, investment, agglomeration.