Regional income inequality model based on theil index decomposition and weighted variance coeficient

Regional income inequality is an important issue in the study on economic development of a certain region. Rapid economic development may not in accordance with people's per capita income. The method of measuring the regional income inequality has been suggested by many experts. This research used Theil index and weighted variance coefficient in order to measure the regional income inequality. Regional income decomposition which becomes the productivity of work force and their participation in regional income inequality, based on Theil index, can be presented in linear relation. When the economic assumption in j sector, sectoral income value, and the rate of work force are used, the work force productivity imbalance can be decomposed to become the component in sectors and in intra-sectors. Next, weighted variation coefficient is defined in the revenue and productivity of the work force. From the quadrate of the weighted variation coefficient result, it was found that decomposition of regional revenue imbalance could be analyzed by finding out how far each component contribute to regional imbalance which, in this research, was analyzed in nine sectors of economic business.