Boxed: Income Inequality and Economic Segregation in Indonesia Metropolitan Cities

Long after the dethronement of President Soeharto and the 1997 Asian Financial Crisis, Indonesia
is back to its own feet and recover from what is perceived to be one of the biggest social, political
and economic turmoil the country has ever experienced. With various government efforts;
notable tax cuts, fiscal stimulus, and so on, the country’s economy started to be back on track.
For the last ten years, Indonesia has been one of the countries with the highest rate of economic
growth, compared to its neighbors in East Asia. Its resilience against crisis remains uncontested,
as the country succeeded in achieving positive rate of economic growth during the global
financial crisis in 2008, though the source of its resilience is still debatable. On the other hand,
poverty rate in Indonesia has been continually decreasing since the financial crisis subsided.
Indonesia’s poverty rate halved between 1999 and 2013 and as we can see from Chart 1, the
decreasing trend of poverty is the same for both urban and rural poverty. The same trend goes
for its official rate of unemployment, which decreased from being 9.06 percent in 2002 to 5.94
percent in 2014.

Poverty Rate in Indonesia, 1998 - 2013

30%

25%

20%

15%

10%

5%

0%
1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Overall Urban Rural

Unfortunately, despite the remarkable growth and recovery from the crisis more than a decade
ago, Indonesia is facing the looming threat of inequality. Although the country grew at an average
rate of 5.5% since the crisis, it is associated with ever-increasing rate of inequality between the
rich and the poor. The level of income inequality, measured by Gini index, has been steadily
increasing since the year 2000. Many factors were held responsible for the current trend; unequal
access to infrastructure,

Background

 Inequality in Indonesia
o History: recovery from financial crisis
o Explain how income inequality has been increasing for the past few years
o Explain how inequality in urban areas have massive impact on the overall inequality
 Urbanization in Indonesia
o Explain how urbanization has been increasing rapidly since the financial crisis subsided
o Urbanization has been followed by higher demand for housing
 The simultaneous process of increasing urban inequality and urbanization may result in various
implications, on of which is the sorting of neighborhood by income
 How important is the issue of residential segregation by income? Residential segregation by
income may cause the prophecy of income inequality being a vicious circle to be self-fulfilling

Research Question

Does residential segregation by income exist in Indonesian metropolitan cities?

Is residential segregation by income correlated to the growth of inequality in Indonesian

metropolitan cities?

Research Objectives

Research Hypothesis

Research Scope

Research Methodology

Research Benefits

Outline of Research