Factors Affecting Income Inequality in Indonesia

In comparison to other Southeast Asian countries, Indonesia’s income is growing rapidly. The four richest Indonesians now surpasses that of 100 million of their poorest citizens. In terms of income inequality, Indonesia is now ranked sixth in the world. Therefore, the purposes of this study is to investigate factors affecting income inequality in Indonesia from 1994 to 2023 using time series regression analysis with OLS method. Foreign direct investment (FDI) inflows, population growth, and corruption are major factors leads income inequality while unemployment rate is not significant and school enrollment tertiary have multicollinearity problem. The findings show that foreign direct investment (FDI) inflows, population growth, and corruption have a positive and significant relationship between income inequality. In order to address income inequality, foreign direct investment (FDI) inflows, population growth, and corruption should be controlled.