The Impact of Trade Openness to Structural Transformation and Inequality: The Case of Indonesia

Sammanfattning

Despite achieving sustained growth for the past two decades, Indonesia is still regarded as a moderately high-inequality country. One of the most plausible explanations in the changing pattern of its structural transformation, which could be caused as a result of increasing global integration in Indonesia. Therefore, using panel data regression, this study aims to investigate the impact of trade openness on income inequality in the process of economic transformation in Indonesia, with the scope of national and subnational level. The study found that the impact of trade openness on sectoral share varies across national and region. These results imply that future trade and development policies in Indonesia should take into account more of the regional variation, so that it can mitigate the negative impact on inequality in each sub-national level.