Regional inequality sensitivity to financial allocation: extending complexity economics through deep learning

This study examines spatial disparities as a challenge to reaching Indonesia’s inclusive economy, where national growth is not evenly distributed across regions. Using the lens of complexity economics, modelled with deep learning and explainable AI, the analysis shows that economic, institutional, behavioural and environmental factors shape inter-regional inequality. Investment expansion in disadvantaged regions is constrained by labour mobility; thus, surplus income returns to Java and Sumatra. Post-COVID poverty reduces labour capacity and middle-class growth. Weak natural resource governance burdens local economies. Additionally, digitalisation, financial access and improved infrastructure are necessitated. These findings draw policy recommendations to reduce persistent regional inequality.