MODELING ANALYSIS OF INCOME INEQUALITY FACTORS IN JAVA ISLAND : DYNAMIC PANEL DATA GMM MODEL

The problem of income differences between people occurs in several aspects, both from unemployment, investment, economic growth, and poverty factors, which are one of the reasons for income inequality. This study aims to analyze the influence of the Open Unemployment Rate, Domestic Investment, Gross Regional Domestic Product, and Poverty Rate on income inequality in six provinces on the island of Java in the 2014-2023 period. The method used is the Generalized Method of Moment (GMM) with the First Difference GMM (FD-GMM) and System GMM (SYS-GMM) approaches, and includes parameter significance tests, model specification tests, irregularity tests, and the selection of the best models. The results of the study show that the Open Unemployment Rate has a positive and significant influence on income inequality on the island of Java. Meanwhile, Domestic Investment, Gross Regional Domestic Product, and Poverty Rate did not have a significant positive effect on income inequality in the region. This study emphasizes the importance of government policies in increasing inclusiveness which is expected to contribute and reduce the level of income inequality.