The Effect of Fiscal Decentralization, Human Development Index (HDI), and Poverty Rate on Income Disparity in Sumatra Provinces

Income disparity is defined as the discrepancy in income distribution between different communities. The existence of high and low income levels can serve as a benchmark for a country, regardless of whether it is classified as developed or developing. The impact of income disparity has the potential to influence the sustainability of economic development at the regional and national levels. High income disparity has a deleterious effect on the political and economic stability of a country. This research employs a descriptive quantitative methodology. This research employs secondary data and panel data regression analysis tools. The data utilized in this study were procured from the Directorate General of Fiscal Balance and the Central Bureau of Statistics of all provinces within the Sumatra region. The research data set includes the Fiscal Balance Fund, the Human Development Index, the percentage of the population living below the poverty line, and the Gini Ratio Index for the past seven years, from 2017 to 2023. The findings of this study indicate that fiscal decentralization and poverty level exert a negative but insignificant influence on income disparity in the Sumatra region provinces. Conversely, the human development index exerts a negative and significant influence on income disparity in the same region.