DETERMINANTS OF INCOME INEQUALITY IN WEST JAVA: GROWTH, WAGES, INDUSTRY, AND HUMAN DEVELOPMENT (2013–2024)

Abstract

This study is motivated by the high income inequality in West Java Province, as indicated by the Gini index, which consistently exceeds the national average. This inequality presents a significant challenge to achieving inclusive and sustainable development. Despite high economic growth, equity has not been guaranteed, factors such as disparities in regional minimum wages, the concentration of the industrial sector in urban areas, and variations in the quality of human resources exacerbate this inequality. This study aims to analyze the effects of economic growth, district/city minimum wage (UMK), industrial sector contribution, and Human Development Index (HDI) on income inequality in West Java during the period from 2013 to 2024. This research employs a quantitative approach through panel data regression analysis. Model selection was performed using the Chow test to determine the appropriate method between Common Effects and Fixed Effects. The results indicate that economic growth and the contribution of the industrial sector significantly affect income inequality, while the DMW and HDI variables do not have a significant impact. The low coefficient of determination suggests that other variables outside the model also influence inequality. These findings underscore the necessity for fairer income redistribution policies that prioritize equitable industrialization and enhanced access to education and health services, which are essential for promoting inclusive and equitable economic growth.