ON THE RELATIONSHIP BETWEEN INFORMAL EMPLOYMENT AND INEQUALITY IN INDONESIA
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Informal employment makes up for a majority of employment in Indonesia. This study attempts to draw a link between the country’s persistent informal employment and inequality. Using regency and city-level data from Sakernas and Susenas between the period of 2017 to 2019, we found that a larger proportion of informal employment within a region is negatively associated with expenditure inequality. While this contradicts findings from similar studies conducted in other developing countries, we provide several plausible explanations as to why this may be the case. In addition, a Theil decomposition analysis is performed to further explore the dynamics between informal employment and inequality.