Research ReportSocial Development

The Impact of Village Funds on Welfare and Inequality

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Economic development in Indonesia has shown massive results today. One of the ways this is characterized by economic growth is driven by developments in government policies, effective use of natural resources, and the growth of a workforce dominated by young people (Elias & Noone, 2016). However, economic growth is not always accompanied by an increase in the welfare of society as a whole. This condition is because the results of growth are sometimes not distributed evenly, both between individuals and between regions.

The results of this uneven growth produce income inequality which is quite worrying in Indonesia. Based on the Central Statistics Agency in 2018, the Gini coefficient as a measure of income inequality is still in poor condition. In 2014, Indonesia's Gini coefficient reached 0.406 and this increased until in 2016 it reached 0.408. Even though in 2017 and 2018 the Gini coefficient showed a decreasing trend, this figure is still considered high because it is above 0.390. This explains that an improving economy cannot immediately solve the problem of differences in economic and social conditions that exist in society.