Dr. in Economics, Faculty of Economic and Business, Brawijaya University-INDONESIA
Setyo TRI WAHYUDI
Ph.D in Economics, Faculty of Economic and Business, Brawijaya University-INDONESIA
Zamrud SISWA UTAMA
Master of Economics Student at Faculty of Economic and Business, Brawijaya University-INDONESIA
This paper examines the impact of trade openness and Indonesia’s fiscal policy on income inequality and economic growth. The error correction model approach was used to analyze the effect during the period 1980 to 2015. The results show that trade openness can improve inequality but at the same time impede growth. The effect of fiscal policy on reducing inequality is only generated by tax collection but is temporary. Meanwhile, government spending on infrastructure and health proved to encourage growth. On the other hand, education sector spending and tax collection can actually hamper growth.
Keywords: Trade Openness, Inequality, Growth, Fiscal Policy
JEL classification: E62, F63, H50, O40