Spatial Sorting of Rich Versus Poor People in Jakarta

Abstract

We test an adjusted version of the classic monocentric-city model to explain the spatial sorting of rich versus poor people in Jakarta. We find that in Jakarta (1) the urban rich tend to live in the city centre; (2) because of extreme congestion levels, the elasticity between income and the opportunity cost of time spent commuting is higher than the elasticity between income and demand for larger plots of residential land; and (3) the motorbike is the most important and fastest mode of transport for the urban poor. These findings contrast with existing evidence from the United States. Both the logic of the monocentric-city model and empirical evidence suggest that the urban rich in Jakarta tend to cluster in the city centre. However, empirical evidence also suggests that the sorting of the rich and poor in Jakarta—as indicated by spatial variation in income, expenditure and land prices—depends not only on distance from the city centre but also on other neighbourhood characteristics, especially flood risk, crime rates and the proximity of a commercial area.