Inequality in Indonesia: What can we learn from top incomes?

Abstract: Using taxation and household survey data, this paper estimates top income shares for Indonesia during 1920-2004. Our results suggest that top income shares grew during the 1920s and 1930s, but fell in the post-war era. We observe a sharp rise in top income shares during the late-1990s, coinciding with the 1997-98 economic crisis. Where comparable data are available, top income shares in Indonesia are generally higher than in other countries, a finding that is at odds with the view that Indonesia is a relatively egalitarian society. This suggests that top income shares may provide a more complete picture of developing country inequality in comparative perspective.