Sustainable income, employment, and income distribution in Indonesia

Abstract

In this paper sustainable income of Indonesia is estimated by incorporating environmental capital depreciation allowance. The natural resources of Indonesia are valued as capital asset, and a depreciation allowance for its maintenance is estimated and incorporated into a Keynesian model of income determination for estimating sustainable income. The aim is to analyse the possibilities of achieving both sustainability and full employment in the economy. To explore the linkages between environmental depreciation, income distribution and employment, Gini Coefficient and Lorenz Curve are applied to this analysis. Policy options based on income distributional impact of environmental capital depreciation allowance are discussed in detail. © The Pakistan Development Review.