THE IMPACT OF FISCAL DECENTRALIZATION ON INCOME AND EDUCATION INEQUALITY THROUGH ECONOMIC GROWTH IN EAST JAVA

Abstract

There are still many districts in East Java Province that are categorized as underdeveloped regions, which means that the region has low economic growth with a high income and education inequality. An economic model analysis that illustrates how the impact of fiscal decentralization has been exercised on income inequality and inequality of education through economic growth is needed. The analysis model used is path analysis to determine the direct and indirect impact of fiscal decentralization on income and education inequality through economic growth. The data used in the study were panel data from 2008 to 2015 collected from 29 districts in the East Java Province. The results of the study indicate that the implementation of the fiscal decentralization policy has not been able to encourage economic growth and reduce the number of income inequality and inequality of education. Decentralization makes income inequality even more intense. Economic growth has not been able to reduce the income inequality, but it can reduce the rate of education inequality.