Determinants of Interprovincial Income Inequality in Indonesia: A Case Study of DIY Yogyakarta, DKI Jakarta, West Java, Gorontalo, and West Papua

Income inequality is one of the critical issues encountered in the process of economic development in Indonesia. This study aims to evaluate the influence of Provincial Minimum Wage (PMW), Mean Years of Schooling (MYS), and Open Unemployment Rate (OUR) on the level of interprovincial income inequality in Indonesia during the period of 2015–2024. This research employs a panel data regression approach using the Common Effect Model (CEM) as the selected estimation model. The data analyzed cover five provinces with the highest levels of inequality based on the Gini ratio, namely the Special Region of Yogyakarta, DKI Jakarta, West Java, Gorontalo, and West Papua. The findings indicate that the Mean Years of Schooling (MYS) has a positive and significant effect on income inequality, whereas the Provincial Minimum Wage (PMW) and Open Unemployment Rate (OUR) exert a negative and significant effect. These results have important implications for policymaking, particularly in promoting equitable access to education, wage protection for workers, and unemployment reduction as measures to address income inequality in Indonesia.