Analysis Of Factors Affecting The Disparity Of Income Distribution In North Sumatra Province In 2012-2021

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Analysis of Factors Affecting the Disparity of Income Distribution in North Sumatra Province in 2012-2021

Introduction

Income inequality has become a pressing issue in many parts of the world, including North Sumatra Province in Indonesia. The disparity in income distribution can have significant social and economic implications, including reduced economic growth, increased poverty, and social unrest. Therefore, it is essential to understand the factors that contribute to income inequality in North Sumatra Province. This study aims to analyze the effect of Gross Regional Domestic Product (GRDP) with constant prices, government spending, working population, and household dependents on Gini Ratio in North Sumatra Province from 2012 to 2021.

Methodology

This study uses the Explanatory Research method with Data Panel (Time Series and Cross Section) as a data source. The data were analyzed using EViews 12 software. The results of the study are based on the analysis of the panel data, which includes the variables of GRDP, government spending, working population, and household dependents.

Results

The results of the study show that the best model for panel data was a fixed effect model. Regression analysis reveals that:

*** GRDP has a significant negative influence on Gini Ratio. ** This means that the higher the GRDP in North Sumatra Province, the more even the distribution of income. The negative influence of GRDP on Gini Ratio suggests that economic growth can lead to a reduction in income inequality. This is consistent with the theory of trickle-down economics, which suggests that economic growth can lead to a reduction in poverty and income inequality.

*** Government expenditure has a significant positive influence on the Gini Ratio. ** This shows that an increase in government spending, although it has a positive impact on economic growth, can actually increase income inequality in North Sumatra. This result is consistent with the theory of rent-seeking behavior, which suggests that government spending can lead to a concentration of wealth and power in the hands of a few individuals.

*** The number of working residents has a negative influence, but it is not significant on the Gini Ratio. ** This indicates that although the number of working population increases, it does not significantly reduce income inequality in North Sumatra. This result is consistent with the theory of labor market segmentation, which suggests that the labor market is segmented into different groups, with some groups having better access to employment and higher wages than others.

*** Household dependents have a negative influence, but it is not significant on the Gini Ratio. ** This shows that the increase in household dependents does not significantly reduce income inequality in North Sumatra. This result is consistent with the theory of demographic transition, which suggests that changes in population demographics can lead to changes in income inequality.

Implications of the Results

The results of this study have several implications for policy makers in North Sumatra Province. The estimated model shows that 63% of the Gini Ratio is influenced by GRDP, government expenditure, the number of working residents, and the dependents of the household. The rest is influenced by other factors that are not examined in this study.

*** Increasing economic growth: ** Efforts to increase GRDP in North Sumatra Province need to be accompanied by equitable and inclusive policies, so that economic growth can be enjoyed by all levels of society. This can be achieved through policies such as progressive taxation, social welfare programs, and labor market regulations.

*** Improving the quality of government spending: ** Government expenditure must be directed at programs that can improve the welfare of the community and reduce income inequality. This can be achieved through policies such as investing in education, healthcare, and social welfare programs.

*** Increasing access and quality of labor: ** Efforts to increase the number of working residents need to be accompanied by efforts to improve the quality of labor, so that they can earn better income and contribute to reducing income inequality. This can be achieved through policies such as vocational training, labor market regulations, and social welfare programs.

Conclusion

This study provides important information about the factors that influence the disparity in income distribution in North Sumatra Province. The results of this study can be used as a basis for formulating more effective policies to reduce income inequality and improve the welfare of the people in North Sumatra Province. The study highlights the importance of GRDP, government spending, working population, and household dependents in influencing income inequality in North Sumatra Province.

Recommendations

Based on the results of this study, the following recommendations are made:

  1. Increase economic growth: Efforts to increase GRDP in North Sumatra Province need to be accompanied by equitable and inclusive policies, so that economic growth can be enjoyed by all levels of society.
  2. Improve the quality of government spending: Government expenditure must be directed at programs that can improve the welfare of the community and reduce income inequality.
  3. Increase access and quality of labor: Efforts to increase the number of working residents need to be accompanied by efforts to improve the quality of labor, so that they can earn better income and contribute to reducing income inequality.

Limitations of the Study

This study has several limitations. The study only examines the effect of GRDP, government spending, working population, and household dependents on Gini Ratio in North Sumatra Province from 2012 to 2021. The study does not examine other factors that may influence income inequality, such as education, healthcare, and social welfare programs. The study also assumes that the variables examined are exogenous and do not interact with each other.

Future Research Directions

Future research directions include:

  1. Examining the effect of other factors on income inequality: Future studies can examine the effect of other factors, such as education, healthcare, and social welfare programs, on income inequality in North Sumatra Province.
  2. Using other data sources: Future studies can use other data sources, such as household surveys and administrative data, to examine the effect of GRDP, government spending, working population, and household dependents on Gini Ratio in North Sumatra Province.
  3. Using other econometric models: Future studies can use other econometric models, such as dynamic panel data models and instrumental variable models, to examine the effect of GRDP, government spending, working population, and household dependents on Gini Ratio in North Sumatra Province.
    Q&A: Analysis of Factors Affecting the Disparity of Income Distribution in North Sumatra Province in 2012-2021

Frequently Asked Questions

Q: What is the main objective of this study?

A: The main objective of this study is to analyze the effect of Gross Regional Domestic Product (GRDP) with constant prices, government spending, working population, and household dependents on Gini Ratio in North Sumatra Province from 2012 to 2021.

Q: What is the significance of this study?

A: This study is significant because it provides important information about the factors that influence the disparity in income distribution in North Sumatra Province. The results of this study can be used as a basis for formulating more effective policies to reduce income inequality and improve the welfare of the people in North Sumatra Province.

Q: What are the key findings of this study?

A: The key findings of this study are:

  • GRDP has a significant negative influence on Gini Ratio, indicating that economic growth can lead to a reduction in income inequality.
  • Government expenditure has a significant positive influence on the Gini Ratio, indicating that an increase in government spending can actually increase income inequality in North Sumatra.
  • The number of working residents has a negative influence, but it is not significant on the Gini Ratio, indicating that although the number of working population increases, it does not significantly reduce income inequality in North Sumatra.
  • Household dependents have a negative influence, but it is not significant on the Gini Ratio, indicating that the increase in household dependents does not significantly reduce income inequality in North Sumatra.

Q: What are the implications of the results of this study?

A: The implications of the results of this study are:

  • Increasing economic growth: Efforts to increase GRDP in North Sumatra Province need to be accompanied by equitable and inclusive policies, so that economic growth can be enjoyed by all levels of society.
  • Improving the quality of government spending: Government expenditure must be directed at programs that can improve the welfare of the community and reduce income inequality.
  • Increasing access and quality of labor: Efforts to increase the number of working residents need to be accompanied by efforts to improve the quality of labor, so that they can earn better income and contribute to reducing income inequality.

Q: What are the limitations of this study?

A: The limitations of this study are:

  • The study only examines the effect of GRDP, government spending, working population, and household dependents on Gini Ratio in North Sumatra Province from 2012 to 2021.
  • The study does not examine other factors that may influence income inequality, such as education, healthcare, and social welfare programs.
  • The study assumes that the variables examined are exogenous and do not interact with each other.

Q: What are the future research directions?

A: The future research directions include:

  • Examining the effect of other factors on income inequality: Future studies can examine the effect of other factors, such as education, healthcare, and social welfare programs, on income inequality in North Sumatra Province.
  • Using other data sources: Future studies can use other data sources, such as household surveys and administrative data, to examine the effect of GRDP, government spending, working population, and household dependents on Gini Ratio in North Sumatra Province.
  • Using other econometric models: Future studies can use other econometric models, such as dynamic panel data models and instrumental variable models, to examine the effect of GRDP, government spending, working population, and household dependents on Gini Ratio in North Sumatra Province.

Q: What are the policy implications of this study?

A: The policy implications of this study are:

  • Increasing economic growth: Efforts to increase GRDP in North Sumatra Province need to be accompanied by equitable and inclusive policies, so that economic growth can be enjoyed by all levels of society.
  • Improving the quality of government spending: Government expenditure must be directed at programs that can improve the welfare of the community and reduce income inequality.
  • Increasing access and quality of labor: Efforts to increase the number of working residents need to be accompanied by efforts to improve the quality of labor, so that they can earn better income and contribute to reducing income inequality.

Q: What are the recommendations of this study?

A: The recommendations of this study are:

  1. Increase economic growth: Efforts to increase GRDP in North Sumatra Province need to be accompanied by equitable and inclusive policies, so that economic growth can be enjoyed by all levels of society.
  2. Improve the quality of government spending: Government expenditure must be directed at programs that can improve the welfare of the community and reduce income inequality.
  3. Increase access and quality of labor: Efforts to increase the number of working residents need to be accompanied by efforts to improve the quality of labor, so that they can earn better income and contribute to reducing income inequality.