Abstract

In many developing countries including Indonesia, issues concerning equity in income distribution often receive special attention since inequality in income will result in economic inequality. This study aimed to determine the effect of economic growth, the Regional Budget (APBD), wage and the ratio of Muslim population on income distribution in Indonesia. 
 This was a descriptive study using a quantitative method and a normative juridical approach. The data used were the time series data in 2008-2012 and the cross section data in 33 provinces in Indonesia. The secondary data were taken from the Central Bureau of Statistics and Ministry of Religious Affairs of the Republic of Indonesia. The analysis technique used a panel data model with fixed effect method (FEM). The results showed that (1) Economic Growth (PE), the Regional Budget (APBD) and the ratio of Muslim population (Muslims) were not significant in affecting income distribution (DP), because an increase in these three variables was not always followed by a decline in DP and (2) wage had a positive and significant effect on income distribution, meaning that the higher the amount of wages would result in higher levels of the equity rate of income distribution. 
 Based on the findings of this research, it is expected that the increase in PE and APBD can directly be proportional to the reduction in the Gini ratio in the future. Muslims as the majority in Indonesia are also expected to be able to contribute positively to the income distribution, such as by maximizing Zakāh as a solution viewed from the perspective of Islamic Economic.

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