Exploring Socioeconomic Determinants of Income Inequality in East Kalimantan: Panel Data Regression and Monte Carlo Simulation

Abstract

This study investigates the socioeconomic determinants of income inequality in East Kalimantan during 2019–2024, with the objective of examining how education, demographic structure, and domestic investment shape disparities in welfare distribution. A quantitative explanatory approach is employed through panel data regression using the Common Effect Model (CEM), supported by specification tests to ensure model selection accuracy. To strengthen the robustness of the results, 1,000 Monte Carlo simulations are conducted to evaluate coefficient stability under random variations. The findings show that Mean Years of Schooling (coef. 0.0267, p<0.01) and Sex Ratio (coef. 0.0032, p<0.01) significantly increase income inequality, while Domestic Direct Investment (coef. –0.0074, p<0.05) significantly reduces it. The Monte Carlo simulations confirm the reliability of these estimates with minimal bias, reinforcing the stability of the regression outcomes. The study concludes that unequal access to education and gender imbalances exacerbate inequality, whereas domestic investment plays a corrective role in narrowing income gaps. These insights emphasize the need for policies that promote equitable education, gender-inclusive labor markets, and sustained domestic investment to foster inclusive growth in East Kalimantan.