The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia

Despite the recent reduction in the poverty rate in Indonesia, income inequality has not shown any improvement. Income inequality, also known as income disparity, has been a prolonged issue in Indonesia and has caused great dissatisfaction among the public. Many of them do not feel an improvement in...

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Published in:Sustainability (Switzerland)
Main Author: Handayani B.D.; Yanto H.; Pujiati A.; Ridzuan A.R.; Keshminder J.S.; Shaari M.S.
Format: Article
Language:English
Published: MDPI 2022
Online Access:https://www.scopus.com/inward/record.uri?eid=2-s2.0-85143785882&doi=10.3390%2fsu142315915&partnerID=40&md5=b729d8b95601529a861f49c5c6bb2cfc
id 2-s2.0-85143785882
spelling 2-s2.0-85143785882
Handayani B.D.; Yanto H.; Pujiati A.; Ridzuan A.R.; Keshminder J.S.; Shaari M.S.
The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia
2022
Sustainability (Switzerland)
14
23
10.3390/su142315915
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85143785882&doi=10.3390%2fsu142315915&partnerID=40&md5=b729d8b95601529a861f49c5c6bb2cfc
Despite the recent reduction in the poverty rate in Indonesia, income inequality has not shown any improvement. Income inequality, also known as income disparity, has been a prolonged issue in Indonesia and has caused great dissatisfaction among the public. Many of them do not feel an improvement in their wellbeing. Most studies explore these issues based on microeconomics perspectives, and limited studies focus on macroeconomic determinants. Thus, it is imperative to investigate the potential macroeconomic determinants of income inequality in Indonesia, particularly energy consumption (ENC), corruption (COR), foreign direct investment (FDI), and other supporting determinants such as economic growth (GDP), financial development (FD), and CO2 emissions. Data from 1984 to 2020 were collected and analyzed, employing the autoregressive distributed lag (ARDL) approach. The findings indicate that economic growth, corruption, and FDI can contribute to a smaller gap between the rich and the poor. At the same time, greater CO2 emissions can intensify income inequality in Indonesia both in the short and long run. Pollution, as captured by CO2 emissions, can affect the health of the poor. Health problems create difficulties for poor people to work and reduce the probability of earning income, ultimately widening income inequality. FD and energy use, on the other hand, do not influence income distribution in the long and short run. The findings indicate that boosting economic growth and FDI significantly reduce income disparity in Indonesia. Various policy recommendations are suggested in these studies based on the long-run outcomes. © 2022 by the authors.
MDPI
20711050
English
Article
All Open Access; Gold Open Access
author Handayani B.D.; Yanto H.; Pujiati A.; Ridzuan A.R.; Keshminder J.S.; Shaari M.S.
spellingShingle Handayani B.D.; Yanto H.; Pujiati A.; Ridzuan A.R.; Keshminder J.S.; Shaari M.S.
The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia
author_facet Handayani B.D.; Yanto H.; Pujiati A.; Ridzuan A.R.; Keshminder J.S.; Shaari M.S.
author_sort Handayani B.D.; Yanto H.; Pujiati A.; Ridzuan A.R.; Keshminder J.S.; Shaari M.S.
title The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia
title_short The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia
title_full The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia
title_fullStr The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia
title_full_unstemmed The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia
title_sort The Implication of Energy Consumption, Corruption, and Foreign Investment for Sustainability of Income Distribution in Indonesia
publishDate 2022
container_title Sustainability (Switzerland)
container_volume 14
container_issue 23
doi_str_mv 10.3390/su142315915
url https://www.scopus.com/inward/record.uri?eid=2-s2.0-85143785882&doi=10.3390%2fsu142315915&partnerID=40&md5=b729d8b95601529a861f49c5c6bb2cfc
description Despite the recent reduction in the poverty rate in Indonesia, income inequality has not shown any improvement. Income inequality, also known as income disparity, has been a prolonged issue in Indonesia and has caused great dissatisfaction among the public. Many of them do not feel an improvement in their wellbeing. Most studies explore these issues based on microeconomics perspectives, and limited studies focus on macroeconomic determinants. Thus, it is imperative to investigate the potential macroeconomic determinants of income inequality in Indonesia, particularly energy consumption (ENC), corruption (COR), foreign direct investment (FDI), and other supporting determinants such as economic growth (GDP), financial development (FD), and CO2 emissions. Data from 1984 to 2020 were collected and analyzed, employing the autoregressive distributed lag (ARDL) approach. The findings indicate that economic growth, corruption, and FDI can contribute to a smaller gap between the rich and the poor. At the same time, greater CO2 emissions can intensify income inequality in Indonesia both in the short and long run. Pollution, as captured by CO2 emissions, can affect the health of the poor. Health problems create difficulties for poor people to work and reduce the probability of earning income, ultimately widening income inequality. FD and energy use, on the other hand, do not influence income distribution in the long and short run. The findings indicate that boosting economic growth and FDI significantly reduce income disparity in Indonesia. Various policy recommendations are suggested in these studies based on the long-run outcomes. © 2022 by the authors.
publisher MDPI
issn 20711050
language English
format Article
accesstype All Open Access; Gold Open Access
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