Economic zones and local income inequality: Evidence from Indonesia

Arbeitspapier

Economic zones can be powerful drivers of economic growth in developing countries. However, less is known about their distributional impact on the local society. This paper provides empirical evidence from Indonesian provinces on the relationship between economic zones and within-province income inequality. Estimates from panel regressions and synthetic control case studies suggest that this relationship is positive overall. The estimated rise in income inequality after a zone opens is relatively small on average and may be short-lived. However, the average estimate masks large regional differences, which suggests that the inequality implications of economic zone policies depend on local conditions. One explanation for the rise in inequality is that the unskilled population benefits disproportionately less from the policy. As a remedy, we propose education and training programs that target the poor and unskilled and in which companies also actively participate.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 2225

Classification and Topics

• Classification: Wirtschaft ; Personal Income, Wealth, and Their Distributions ; Economic Impacts of Globalization: Economic Development ; Economic Development: Human Resources; Human Development; Income Distribution; Migration ; Industrial Policy
• Subject: economic zones ; place-based policy ; income distribution ; synthetic control method ; Indonesia

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hornok, Cecília ; Raeskyesa, Dewa Gede Sidan
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW Kiel)
• (where): Kiel
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/260614
• Last update: 10.03.2025, 11:46 AM CET