Rural and urban inequalities in the standard of living of Indonesia.

Abstract

We are using a methodology based on unconditional quantile regression to analyze Urban-Rural income inequality in living standards in Indonesia from 1994 to 2009. Employing household consumption data in Indonesia, we intend to study the determinants, trends and various characteristics that account for the changes in urban-rural inequality across the distribution of per-capita household expenditure.

The main finding is that, there was an impressive improvement in living standards in both urban and rural areas of Indonesia. The effect of improvements in living standards on the urban-rural gap and inequality seems to be an narrowing of the gap an lessening of urban-rural inequality, but only at the lower parts of the household expenditure distribution (i.e., below the 30th percentile).

In addition, we will study the current policies implemented in curbing the issue of inequality and provide recommendations in improving the current situation.