Based on the 2008-2010 Susenas panel data, this study analyzes expenditure inequality in Indonesia from spatial perspectives for the period from 2008-2010 by using several inequality decomposition methods: decomposition of the Theil indices by population subgroups; decomposition of the Gini index by expenditure components; and the Blinder-Oaxaca decomposition. In the Theil decomposition, this study employs not only the conventional approach, where observed between-group inequality is assessed against overall inequality, but also an alternative approach proposed by Elbers and others (2008), where observed between-group inequality is assessed against the maximum between-group inequality, in order to rectify the problem associated with the conventional method.
According to the results of our study, after a substantial decrease in expenditure inequality between 2005 and 2008, there was a slight increase in it between 2008 and 2010. A large proportion of inequality at both the national and regional levels was attributed to within-sector or within-region inequalities. However, the Elbers’ alternative method suggests that a relatively small contribution of between-group inequality to overall inequality does not necessarily mean that between-group inequality is less important than within-group inequalities. In the current and previous Susenas years, urban inequality, especially in Java-Bali, has been significantly higher than rural inequality. Educational differences appear to have played an important role in urban inequality as well as urban-rural disparity. For both urban and rural households, expenditures on non-food items (including expenditure on education) serve to have increased total expenditure inequality.