The Role of Foreign Direct Investment in Reducing Income Inequality in Indonesia

Abstract

Indonesia is the world's fourth-most populous country, featuring an enormous workforce, high economic growth, and rich natural resources. Thus, this made Indonesia becomes very lucrative to open new market businesses for some stakeholders through FDI. However, a debatable discussion on the effect of FDI on income inequality in the case of within the country shows different findings. Moreover, study on the effect of FDI on two different inequalities measurement especially in Indonesia is still limited. Finally, income inequality measurements, namely the Gini coefficient and Williamson Inequality Index, are employed in this research to assess income inequality within the households and between the regions in Indonesia as the effect of FDI inflows from 1996 to 2020.