The Dynamics of Regional Disparity in Java Island After Fiscal Decentralization

Income disparity does not only exist beween Java Island and out of Java. Some figures indicate that the disparity among regions in Java Island is significant. This study aimed to analyze the dynamics of disparity in economic development among regions in Java Island after the decentralization policy. The study employs the data of 105 districts/cities from 2001 up to 2009. Both dynamic and static panel data are employed to satisfy the objectives of the study. The results show that the disparity of regional income among districts/cities is still high in Java Island, while the disparity is dominated by the income inequality among the cities. The model shows that regional GDP convergence does not matter in Java Island, however household income convergence is very high. The significant determinants of disparity among regions in Java Island are share of manufacture, level of labor education, health infrastructure, power and water supply