Dynamics Trading International and Its Implications to Inequality Regional Economy in Indonesia

Abstract

International trade serves as a primary driver of national economic growth, yet its impact on regional inequality remains a subject of ongoing debate. This research aims to analyze the relationship between international trade and regional economic inequality in Indonesia during 2015–2023. The study employs a quantitative approach using panel data regression analysis across 30 provinces, complemented by inequality indices (Williamson Index and Theil Index) to assess spatial distribution of trade benefits. Results demonstrate that exports positively and significantly influence regional economic growth, but create asymmetrical impacts on inequality. Provinces with superior logistics infrastructure, export industry linkages, and global value chain (GVC) integration capture disproportionately larger trade benefits compared to lagging regions. Findings reveal that interregional inequality actually increased during the post-pandemic recovery period, reinforcing arguments that trade liberalization must be accompanied by equity-enhancing policies. Therefore, development planning and trade policies should adopt more inclusive approaches, focusing on regions not yet integrated into global trade networks. This research provides empirical contributions for formulating equitable regional trade and development policies that leverage local potential.