Theoretical and Applied Economics
No. 1 / 2025 (642), Spring
The effect of inflation and fiscal decentralization on income inequality in Sumatra Island of Indonesia: a panel data
Sriwijaya University, Indonesia
Anna YULIANITA
Sriwijaya University, Indonesia
Ariodillah HIDAYAT
Sriwijaya University, Indonesia
Abstract. The aim of this research is to analyze the relationship between the influence of the fiscal independence index, regional spending and inflation on income inequality in ten provinces on the island of Sumatra. This research uses panel data regression, namely the Fixed Effect Model (FEM). The findings of this research indicate that regional spending has a significant negative relationship with income inequality. The role of regional spending has an impact on reducing income inequality. The fiscal independence index has a significant negative effect on reducing income inequality. Inflation has a positive and significant relationship to income inequality.
Keywords: income inequality, local government expenditure, Fiscal Independence Index, inflation, Fixed Effect Model.
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