Abstract
This study aims to analyze how the influence of economic potential in the form of leading and potential sectors on regional inequality in 13 districts and 4 cities in South Sumatra Province. The analytical method used is the Williamson Index measurement to measure regional inequality and the analysis of Static Location Quotient (SLQ) and Dynamic Location Quotient (DLQ). The analysis technique uses panel data regression with the selection of the best model, namely Fixed Effect with the observation period from 2011 to 2019. The results show that the SLQ variable has a positive relationship and does not have a significant effect on the level of regional inequality. The influence coefficient of 0.0379 with a probability value of 0.1113>0.05 (which is the critical limit of 5 percent) is not statistically significant. This condition shows that sectoral economic development will also increase inequality. Economic development in the early stages of a region is generally characterized by the production of the dominant primary sector in the economy, so that at the beginning of development, an increase in economic growth is also followed by an increase in inequality. DLQ shows the constant value of the applicable Fixed Effect model is -0.007971. And it has a negative effect, which means that when the DLQ increases by 1 percent, inequality will decrease by 0.0079 with a probability value of 0.0114<0.05, which is the critical limit of 5 percent, so it is statistically significant, meaning that the increase and development of potential economic sectors that are competitive in the future it will be able to reduce inequality by 0.0079. This shows that there are increasing sectoral developments due to the investment factor of new capital goods in this potential sector which encourages increased labor productivity. There are differences in characteristics between regions, especially the availability of natural resources, causing these areas to be more advanced than other regions.
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