DO REGIONAL MACROECONOMIC VARIABLES INFLUENCE THE INCOME INEQUALITY IN INDONESIA?

This article examines the effects of government expenditures, regional GDP, regional minimum wages, employment rate, and poverty severity on income inequality by applying the system Generalized Method of Moments panel model to overcome the dynamic endogeneity problem from 2007 to 2020. The results show that government expenditure and an increase in the regional minimum wage for low-wage workers can reduce income inequality in both the short run and long run. Furthermore, high regional GDP and high levels of employment rate for workers with low skills can exacerbate the level of income inequality in the long run. However, reducing the severity of poverty has no effect on reducing inequality. This study provides policy recommendations to the government to improve basic public services and make various training skill programs, including ICT, in order to increase creativity and job opportunities for low-income people. [ABSTRACT FROM AUTHOR]