Tariff reform and income inequality in Indonesia

We investigate the impact of tariff reform - which serves as the main instrument of trade liberalisation - on income inequality in Indonesia, using a panel dataset of 26 provinces for the period of 1977-2012. Our study provides evidence from a long period of trade liberalisation analysis and offers some valuable insights into the nexus between trade liberalisation and income distribution. We find that relative inequality was reduced more in provinces that had more exposure to input tariff liberalisation. Furthermore, the results also suggest that tariff cuts play an important part in poverty reduction.