Determinants of income inequality in Indonesia: The roles of economic growth, human development, poverty, wages, and investment

This study investigates the impact of economic growth, the Human Development Index (HDI), poverty rate, provincial minimum wage, and investment on income inequality across 34 provinces in Indonesia. Employing a quantitative approach, the study utilizes panel data from 2015 to 2023, comprising 306 observations. The analysis was conducted using a panel regression with a Random Effect Model (REM), estimated through Panel EGLS (cross-section random effects) to test the hypotheses. The results indicate that, collectively (F-test), the independent variables significantly influence income inequality. Partially (t-test), the poverty rate and investment exhibit a positive and significant effect on income inequality, whereas the provincial minimum wage has a negative and significant effect, suggesting its potential as a tool to reduce inequality. Meanwhile, economic growth and HDI show no statistically significant impact on income inequality.