Cyclical shocks and spatial association of Indonesia's district-level per capita income

Abstract

Our exploratory spatial data analysis covered Indonesia's district-level per capita incomes for 2004–2018 and found statistical evidence of a weak but monotonically increasing positive spatial association. The spatial income clusters/outliers were scattered nationwide and expanded geographically. Applying the filtering method, we found that regional cyclical shocks significantly influenced spatial association, largely in resource-rich districts, and identified the locations of persistent spatial association that were immune to shocks. We also specified new development targets, showing the adjacent coexistence of low-income agrarian clusters with high-income mining clusters in the undeveloped Papuan provinces. The overall national average is moving toward the narrowing of inter-district income disparities. However, nearly half of all districts have widened the income disparities with their neighbors; shocks increased income gaps rather than narrowing them.