Still Gap Issues of Education, Skill and Capital to Income Inequality


1 Faculty of Economics, Universitas Negeri Jakarta, Jakarta, Indonesia

2 Faculty of Economics and Business, Universitas Diponegoro, Semarang, Indonesia


This study aims to explore welfare economic models that are viewed from the perspective of income inequality that still occurs in many countries today. Based on the theory of economic welfare, in this study, income inequality is influenced by the gap in the allocation/ownership of human and capital resources (L, K), especially in the difference of education level, labor skills mismatch and capital allocation gap. Income inequality and resource allocation gaps are measured by a specific index based on the gap formula. Based on panel data regression analysis with sample data in 33 Indonesian provinces (2007-2013), the estimation results show that the gap of education level, labor skills mismatch and credit allocation gap have proven to have a positive and significant effect on income inequality. This means that if the education gap, labor skills mismatch and credit allocation gap increase, then income inequality also increases. By knowing the magnitude of the inequality of resource allocation, policy-makers can reduce problems through reallocation and redistribution policies.


Alvarado, R., & Atienza, M. (2014). The Role of Market access and Human Capital in Regional Wage Disparities: Empirical Evidence for Ecuador. Retrived from
Atkinson, A. B. (1999). The Contributions of Amartya Sen to Welfare Economics. The Scandinavian Journal of Economics, 101(2), 173-190.
Barro, R. J. (2000). Inequality and Growth in a Panel of Countries. Journal of Economic Growth, 5(1), 5-32.
Begrakyan, E., & Grigoryan, A. (2012). Inequality, Growth and Industry Structure: Evidence from Armenia. Retrieved from
Berg, A. G., & Osrty, J. D. (2013). Inequality and Unsustainable Growth: Two Sides of the Same Coin? International Organisations Research Journal, 8(4), 77-99.
Brinkman, H.-J., Attree, L., & Hezir, S. (2013). Addressing Horizontal Inequalities as Drivers of Conflict in the Post-2015 Development Agenda. Retrieved from
Charles-Coll, J. A. (2011). Understanding Income Inequality: Concept, Causes and Measurement. International Journal of Economics and Management Sciences, 1(3), 17-28.
Deininger, K., & Squire, L. (1998). New Ways of Looking at Old Issues: Inequality and Growth. Journal of Development Economics, 57(2), 259-287.
Glaeser, E. L., Resseger, M., & Tobio, K. (2009). Inequality in Cities. Journal of Regional Science, 49(4), 617-646.
Gujarati, D. N., & Porter, D. C. (2012). Basic Econometrics (5th). Jakarta: Salemba Empat.
Haughton, J., & Khandker, S. R. (2009). Handbook on Poverty + Inequality. Washington, DC: World Bank Publications.
Ibourk, A., & Amaghouss, J. (2015). Inequality In Education In The Mena Region: A Macroeconometric Investigation Using Normative Indicators. Applied Econometrics and International Development, 15(2), 129-146.
Jaumotte, F., Lall, S., & Papageorgiou, C. (2013). Rising Income Inequality: Technology, or Trade and Financial Globalization? IMF Economic Review, 61(2), 271-309.
Kai, H., & Shigeyuki, H. (2009). Globalization, Financial Depth and Inequality in Sub-Saharan Africa. Economics Bulletin, 29(3), 2025-2037.
Kaldor, N. (1966). Causes of the Slow Rate of Economic Growth of the United Kingdom: an Inaugural Lecture. New York: Cambridge University Press.
---------- (1955). Alternative Theories of Distribution. The Review of Economic Studies, 23(2), 83-100.
Keynes, J. M. (2018). The General Theory of Employment, Interest, and Money. Retrieved from
Koske, I., Fournier, J. M., & Wanner, I. (2012). Less Income Inequality and More Growth–Are they Compatible? (2), The Distribution of Labour Income. Retrieved from
Kuznets, S. (1955). Economic Growth and Income Inequality. The American Economic Rreview, 45(1), 1-28.
Lucas Jr, R. E. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1), 3-42.
Nations, U. (2014). World Urbanization Prospects: The 2014 Revision, Highlights. Retrieved from
(2013). OECD Guidelines on Measuring Subjective Well-being. Retrieved from
Paredes, D. (2013). The Role of Human Capital, Market Potential and Natural Amenities in Understanding Spatial Wage Disparities in Chile. Spatial Economic Analysis, 8(2), 154-175.
Piketty, T. (2015). About Capital in the Twenty-first Century. American Economic Review, 105(5), 48-53.
Pourfaraj, A., Mehregan, N., Karimi Potanlar, S., & Eskandariata, M. R. (2019). Regional Inequality in Iran and the Impact of Economic Factors: A Spatial Econometric Approach. Iranian Economic Review, 23(2), 297-318.
Romer, P. M. (1994). The Origins of Endogenous Growth. Journal of Economic Perspectives, 8(1), 3-22.
Şahin, A., Song, J., Topa, G., & Violante, G. L. (2014). Mismatch Unemployment. The American Economic Review, 104(11), 3529-3564.
Sattinger, M. (2012). Assignment Models and Quantitative Mismatches. Retrived from research/seminar/files/Michael%20Sattinger.pdf
Sen, A. (1995). Gender Inequality and Theories of Justice (263-329). In M. Nussbaum and J. Glover (Eds.), Women, Culture, and Development: A Study of Human Capabilities. New York: Oxford University Press.
Shahbaz, M., Loganathan, N., Tiwari, A. K., & Sherafatian-Jahromi, R. (2015). Financial Development and Income Inequality: Is there any Financial Kuznets Curve in Iran? Social Indicators Research, 124(2), 357-382.
Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70(1), 65-94.
Sparreboom, T., & Tarvid, A. (2016). Imbalanced Job Polarization and Skills Mismatch in Europe. Journal for Labour Market Research, 49(1), 15-42.
Stiglitz, J. E. (1991). The Invisible Hand and Modern Welfare Economics. National Bureau of Economic Research, Retrieved from
Thomas, V., Wang, Y., & Fan, X. (1999). Measuring Education Inequality: Gini Coefficients of Education. The World Bank, Retried from en/361761468761690314/pdf/multi-page.pdf
World, B. (2000). Making Transition Work for Everyone: Poverty and Inequality in Europe and Central Asia. Retrived from 571801468037741599/pdf/multi-page.pdf
Zimmer, H. (2012). Labor Maket Mismatches. NBB Economic Review, Retrieved from