the cost of inequality arief anshory yusuf. source: cia, world fact book, 2013, world bank wdi, and...

The cost of inequalityArief Anshory Yusuf

Source: CIA, World Fact Book, 2013, World Bank WDI, and author’s calculation

Indonesia can be categorized as a country of high inequality and low income, ..

Among developing countries, the increase in Indonesian inequality over the last decade is among the highest, while most others declined.

Source: World Bank Poverty & Inequality DatabaseNote: The inequality indicators are three-years average where data available.

Current status of Indonesian regional development (2012)Sumatra

Java

Bali NT

Kalimantan

Sulawesi

Maluku Papua

0

10

20Sumatera

Jawa

Bali NT

Kalimantan

Sulawesi

Maluku Papua

0

20

40

GDP Per Capita (Rp million) Poverty incidence (%)

60% of Indonesian GDP generated in Java Jakarta per capita income is 46 times of Maluku province Poverty incidence in Papua is 31%, Jakarta is 3.7%

Trend in inter-regional disparity (2007-2012)

0 5 10 15 20 25 30 35 40

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

-1.0

4.94.5

3.7

4.7 4.65.04.5

2.1

4.7

3.8

5.3

3.8

5.5

3.0

3.8

4.54.4

3.7

0.4

6.76.56.26.1

5.2

2.1

3.33.43.6

4.3

GDP per capita in 2007 (Million 2000 Rupiahs)

Ann

ual c

hane

200

7-20

08

0 5 10 15 20 25 30 35 40 45

-2.5

-2

-1.5

-1

-0.5

0

-1.438

-0.646-0.742

-0.596

-0.37

-1.074

-0.886

-1.202

-0.802

-0.638

-0.184

-0.692

-1.018

-0.588

-1.316

-0.644

-0.49

-1.272-1.326

-0.948

-0.574

-0.39

-0.872

-0.648

-1.404

-0.8

-1.524

-2.004

-1.158

-1.872

-0.7

-2.222

-1.934

f(x) = − 0.0519113574932318 x − 0.0833856600307693R² = 0.849981056729786

Initial poverty incidence 2007 (%)A

nnua

l cha

nge

in p

over

ty in

cide

nce

2007

-201

2 (%

)

Provincial GDP per capita remains highly unequal Poverty incidence converges

Social Dysfunction: why inequality matters

Richard Wilkinson Emeritus Professor of Social Epidemiology

Slides borrowed from:

http://www.northeastern.edu/policyschool/wp-content/uploads/Wilkinson.ppt

TED’s TALK: “How inequality harms society” http://www.ted.com/talks/richard_wilkinson?language=en

www.equalitytrust.org.ukWilkinson & Pickett, The Spirit Level

Neither health nor social problems are related to national income per head

Index of: • Life expectancy• Math & Literacy

• Infant mortality• Homicides• Imprisonment• Teenage births • Trust• Obesity• Mental illness

– incl. drug & alcohol addiction

• Social mobility

Ind

ex o

f h

ealt

h a

nd

so

cial

pro

ble

ms

www.equalitytrust.org.ukWilkinson & Pickett, The Spirit Level

Child well-being is better in more equal countries

www.equalitytrust.org.ukWilkinson & Pickett, The Spirit Level

The UNICEF Index of Child Wellbeing is not related to National Income per head

Wilkinson & Pickett, The Spirit Level www.equalitytrust.org.uk

People in more unequal countries trust each other less

Wilkinson & Pickett, The Spirit Level www.equalitytrust.org.uk

People in more unequal states of the USA trust each other less

www.equalitytrust.org.ukWilkinson & Pickett, The Spirit Level

Mental illness is more common in more unequal societies

15

Infant Mortality Rates are Higher in More Unequal Countries

Source: Wilkinson & Pickett, The Spirit Level (2009) www.equalitytrust.org.uk

Male mortality (25-64 yrs) and income inequality in US

states and Canadian provinces.

Source: Ross NA, Wolfson MC, Dunn JR, Berthelot JM, Kaplan GA, Lynch JW. British Medical Journal 2000;320:898-902

0

30

60

90

120

150

180

Income Inequality

Ho

mic

ide

s p

er

mill

ion

pe

op

le

Low High

Daly M, Wilson M, Vasdev S. Income inequality and homicide rates in Canada and the United States. Can J Crim 2001; 43: 219-36.

Homicide rates are higher in more unequal

US states and Canadian provinces USA states

Canadian provinces

18

Teenage Birth Rates are Higher in More Unequal Rich Countries

Source: Wilkinson & Pickett, The Spirit Level (2009) www.equalitytrust.org.uk

www.equalitytrust.org.ukWilkinson & Pickett, The Spirit Level

Imprisonment rates are higher in more unequal countries

Wilkinson & Pickett, The Spirit Level www.equalitytrust.org.uk

More children drop out of High School in more unequal US states

Educational Scores are Higher in More Equal Rich Countries

Source: Wilkinson & Pickett, The Spirit Level (2009) www.equalitytrust.org.uk

www.equalitytrust.org.ukWilkinson & Pickett, The Spirit Level

Social mobility is lower in more unequal countries

Wilkinson & Pickett, The Spirit Level

Index of: • Life expectancy• Math & Literacy

• Infant mortality• Homicides• Imprisonment• Teenage births • Trust• Obesity• Mental illness

– incl. drug & alcohol addiction

• Social mobility

www.equalitytrust.org.uk

Health and social problems are worse in more unequal countries

Ind

ex o

f h

ealt

h a

nd

so

cial

pro

ble

ms

Inequality and growth

Summarized by: Jorge Alberto Charles-Coll (2013), The Debate Over the Relationship Between Income Inequality and Economic Growth: Does Iinequality Matter for Growth?

Equity for GrowthKeadilan untuk Pertumbuhan

PERTUMBUHAN EKONOMI TINGGI

KEADILAN/ PEMERATAAN

PRAKONDISI

PEMERATAAN KESEMPATAN

PENDIDIKAN

KESEHATAN

MODAL INSANI

PEMBANGUNAN MANUSIA

INOVASI

PRODUKTIVITAS/ DAYA SAING

NEGARA

LINGKUNGAN PENDUKUNG

http://studiumveritatis.org

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