Balancing Funds, Investment, Length of Schooling, Unemployment Rate and Income Inequality in Indonesia

Abstract

The goal of a country's economic development is an equal distribution of income. This study aimed to analyze the direct and indirect effects of balancing funds, domestic investment (PMDN), foreign investment (PMLN), the average length of schooling (RLS), and the open unemployment rate (TPT) on income inequality in Indonesia in 2015-2021. GRDP per capita is an intervening variable, while income inequality is the dependent variable with the Gini Ratio as an indicator. This study uses secondary data in the form of panel data. The method used is Random Effect Model (REM) and Fixed Effect Model (FEM). The results of the panel data regression show that the variable balance funds and RLS have a negative and significant effect, and PMDN has a positive and significant impact on income inequality. Indirectly, the variable balancing funds, PMLN, and RLS negatively and significantly affect income inequality through GRDP per capita. Meanwhile, the TPT variable does not affect income inequality.