The government is aware that the issue of rising inequality is an extremely urgent issue to be addressed. Targets for reducing inequality have also been established in the 2015–2019 National Medium-Term Development Plan (RPJMN), namely reducing the Gini index of 0.41 in 2014 to 0.36 in 2019. However, the decline in the Gini index since 2014 until now is not considered significant; the Gini index only slightly decreased from 0.410 in March 2014 to 0.397 in March 2016. On the other hand, the policy options that exist to reduce inequality are still very limited and not supported by evidence that is comprehensive enough. In that regard, The SMERU Research Institute, in collaboration with the Ford Foundation, conducted a study of Policy to Reduce Inequality in Indonesia from April 2016 to June 2017.

The assessment was conducted using a mixed-method approach. Qualitative analysis was done through a series of field activities of extracting information from a wide range of development stakeholders and policymakers in two metropolitan areas (Greater Solo and Greater Makassar). Besides that, quantitative analysis was carried out through a micro-simulation of various alternative policies that affect households, such as Rice for Poor Households (Raskin), Unconditional Cash Transfer Program (BLSM), Conditional Cash Transfer Program (PKH), and Scholarships for Poor Students (BSM). An intensive literature review and expert consultation in Jakarta were conducted before the field visits. By the end of December 2016, the team managed to do the literature review, expert consultation, and field visit to the Greater Solo. The team also prepared, in parallel, the micro-simulation and second field visit to Greater Makassar that was conducted in January 2017. The deliverables of the study which consisted of a paper on micro-simulation and a policy brief from the qualitative study had already been completed in August 2017.