The views expressed in this presentation are the views of the author and do

not necessarily reflect the views or policies of the Asian Development Bank
Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or
the governments they represent. ADBI does not guarantee the accuracy of the
data included in this paper and accepts no responsibility for any consequences
of their use. Terminology used may not necessarily be consistent with ADB
official terms.

Assessing Income Inequality

Trends : A Lesson from Indonesia
Guntur Sugiyarto
Economics and Research Department
Asian Development Bank
7-9 May 2013

Why Inequality
In addition to unemployment/employment issue,
Income inequality is the most growing concern in
Asia.
Inequality in successful Asian countries is very
considerable.
High economic growth is accompanied by
increasing inequality: not inclusive.
Very important to get the correct measurement.

Inequality and Growth.

Source: ADB Key Indicators 2007 Special Chapter: Inequality in

Asia (adapted from Cornia and Court (2001).

The Problems
Income data is very difficult to collect.
Problems in Income/Expenditure Survey:
Sample Exclusions especially of higher income groups
(sampling errors).
Non-response and non-sampling errors.
Under Enumerations in the data.

Therefore, the resulting inequality indicators tends

to be underestimates.

The Problems continued

The resulting inequality indicators are inconsistent
with other inequality indicators:

Ownership of assets and/or durables

Access to key facilities
Opportunity
Others

May lead to a Wrong policy implications!

Gini Coefficient

Gini Coefficient = A / (A + B).

Gini Trends
Difficult to comprehend

Gini and income ratio

Gini based on income and

landholdings

Gini-Income

Indonesias Inequality in
international context

Source: Source: www.infoplace.com, as calculated from World Development Index, of the World Bank. Taken from Yusuf 2006.

Indonesia: Inequality Trends

Source: Growth, stability, but what about equity? Re-assessing Indonesian inequality from a comparative perspective1
Ewout Frankema and Daan Marks

Indonesia: Wage Inequality

Trends

Source: Growth, stability, but what about equity? Re-assessing Indonesian inequality from a comparative perspective1
Ewout Frankema and Daan Marks

Indonesian Urban and Rural

Inequality
45

Total

Urban

Rural

40

35

30

25

Source: World Bank PovcalNet. Available: http://iresearch.worldbank.org/PovcalNet/index.htm?3

2011

2010

2009

2008

2007

2006

2005

2002

1999

1996

1993

1990

1987

1984

20

Inequality based on Gini and

Income Ratio
Gini Coefficient

Income ratios
14

45

Total

Urban

Rural

Total

Urban

12

40
10
35

30

4
25
2

20

Source: World Bank PovcalNet. Available: http://iresearch.worldbank.org/PovcalNet/index.htm?3

Rural

Household Expenditure: Survey

Result and National Account

Differences between survey result

and national account
Level and share are
different
Food share from national
account is much lower (ratio
1.7); and Non-food is way
larger (ratio 3.3).
The difference in food is
about 13 percentage points
and for non food is much
more.
Are these patterns

I-O SUSEN Rati

Item (%) AS (%) o
Food

0.23

0.36 1.74

Nonfood

0.77

0.64 3.27

Total

1.00

1.00 2.72
Source: Yusuf (2006).

Differences

Are these patterns consistent?

Across times?
Across countries?
What are the main causes?
How to solve the problems?

Possible Solutions
Interpreted cautiously
Used only for comparisons:
across regions and/or characteristics.

Adjusted Gini Coefficient (HDI- UNDP).

Reweighting household survey result.
Combined with other inequality indicators:
Ownership of assets and/or durables; Access to key
facilities; Opportunities; Other Indicators

Others?

Solution Examples: Refining Data

Solution Examples: Reweighting

and Recalculating
A. Lorenz Curve and Gini Coefficient (All
Indonesia)

Note: Gini0=I-O; Gini1=Survey.

Source: Yusuf (2006).

B. Lorenz Curve and Gini Coefficient

(Indonesia, without Jakarta)

Thank You!