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Political competition and economic performance: evidence from Indonesia

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  • Jahen F. Rezki

    (Universitas Indonesia
    LPEM-FEB UI)

Abstract

This paper analyses the impact of political competition on economic performance in Indonesia. This study uses a database covering 427 districts in Indonesia, from 2000 to 2013. Political competition is measured using the Herfindahl Hirschman Concentration Index for the district parliament election. This variable is potentially endogenous, because political competition is likely to be non-random and correlated with unobservable variables. To solve this problem, I use the lag of the average political competition within the same province as the instrumental variable for political competition. The degree of political competition boosts real Regional Gross Domestic Product (RGDP) per capita and RGDP growth by 0.7 and 0.6%, respectively. This study also finds that stiffer political competition is associated with lower own source revenue, higher non agricultural RGDP share, and higher Human Development Index (HDI).

Suggested Citation

  • Jahen F. Rezki, 2022. "Political competition and economic performance: evidence from Indonesia," Economics of Governance, Springer, vol. 23(2), pages 83-114, June.
    • Handle: RePEc:spr:ecogov:v:23:y:2022:i:2:d:10.1007_s10101-022-00272-3
    DOI: 10.1007/s10101-022-00272-3
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    Cited by:

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    More about this item

    Keywords

    Political competition; Regional government; Indonesia; Economic performance;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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