Fiscal Decentralisation, Local Institutions and Public Goods Provision: Evidence from Indonesia
AbstractUsing data from the Indonesian Family Life Surveys, this paper studies the impact of fiscal decentralisation in Indonesia on local public spending across communities with different types of local institutions. Our results provide evidence of heterogeneity in access to public goods across communities in the period prior to fiscal decentralisation; with significantly greater spending on schools and health centres in communities which observe traditional adat laws (which promote an ethic of mutual cooperation), and less spending on roads, public transport, communications etc. in communities which have a democratic electoral system. Fiscal decentralisation led to an increase in the share of spending on physical infrastructure, as well as a convergence in spending across communities with different types of local institutions. We develop a theoretical model to argue that communities which enjoy a higher level of mutual cooperation would benefit less from investment in public goods which facilitate communication and exchange with outsiders – as these improve the outside options of community members and therefore makes it more difficult to sustain intra-community cooperation. Surprisingly, investment in communications and transport infrastructure in these communities were more restrained during the period of centralised fiscal control.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7076.
Length: 43 pages
Date of creation: Dec 2012
Date of revision:
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- Sarmistha Pal & Zaki Wahhaj, 2012. "Fiscal Decentralisation, Local Institutions and Public Goods Provision: Evidence from Indonesia," Studies in Economics 1216, Department of Economics, University of Kent.
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
- NEP-DEV-2013-01-07 (Development)
- NEP-PBE-2013-01-07 (Public Economics)
- NEP-URE-2013-01-07 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Timur Kuran, 1997. "Islam and Underdevelopment: An Old Puzzle Revisited," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(1), pages 41-, March.
- Alberto Alesina & Reza Baqir & William Easterly, 1999.
"Public Goods And Ethnic Divisions,"
The Quarterly Journal of Economics,
MIT Press, vol. 114(4), pages 1243-1284, November.
- Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank.
- Alberto Alesina & Reza Baqir & William Easterly, 1997. "Public Goods and Ethnic Divisions," NBER Working Papers 6009, National Bureau of Economic Research, Inc.
- Baqir, Reza & Easterly, William & Alesina, Alberto, 1999. "Public Goods and Ethnic Divisions," Scholarly Articles 4551797, Harvard University Department of Economics.
- Kimball, Miles S, 1988. "Farmers' Cooperatives as Behavior Toward Risk," American Economic Review, American Economic Association, vol. 78(1), pages 224-32, March.
- Alesina, Alberto & La Ferrara, Eliana, 2005. "Ethnic Diversity and Economic Performance," Scholarly Articles 4553005, Harvard University Department of Economics.
- Banerjee, Abhijit & Iyer, Lakshmi & Somanathan, Rohini, 2007.
"Public Action for Public Goods,"
CEPR Discussion Papers
6154, C.E.P.R. Discussion Papers.
- Ghazala Mansuri, 2004.
"Community-Based and -Driven Development: A Critical Review,"
World Bank Research Observer,
World Bank Group, vol. 19(1), pages 1-39.
- Mansuri, Ghazala & Rao, Vijayendra, 2004. "Community-based (and driven) development : A critical review," Policy Research Working Paper Series 3209, The World Bank.
- Wahhaj, Zaki, 2010.
"Social norms and individual savings in the context of informal insurance,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 76(3), pages 511-530, December.
- Zaki Wahhaj, 2008. "Social Norms and Individual Savings in the Context of Informal Insurance," CEDI Discussion Paper Series 08-20, Centre for Economic Development and Institutions(CEDI), Brunel University.
- Raghabendra Chattopadhyay & Esther Duflo, 2004.
"Women as Policy Makers: Evidence from a Randomized Policy Experiment in India,"
Econometric Society, vol. 72(5), pages 1409-1443, 09.
- Raghabendra Chattopadhyay & Esther Duflo, 2004. "Women as policy makers: Evidence from a randomized policy experiment in india," Framed Field Experiments 00224, The Field Experiments Website.
- Torsten Persson & Guido Tabellini, 2004. "Constitutions and Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 75-98, Winter.
- Hal HILL & Takashi SHIRAISHI, 2007. "Indonesia After the Asian Crisis," Asian Economic Policy Review, Japan Center for Economic Research, vol. 2(1), pages 123-141.
- Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
- Fafchamps, Marcel, 1992. "Solidarity Networks in Preindustrial Societies: Rational Peasants with a Moral Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 147-74, October.
- Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
- Bowles, Samuel & Gintis, Herbert, 2004. "Persistent parochialism: trust and exclusion in ethnic networks," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 1-23, September.
- Miguel, Edward & Gugerty, Mary Kay, 2005. "Ethnic diversity, social sanctions, and public goods in Kenya," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2325-2368, December.
- Faguet, Jean-Paul, 2001. "Does decentralization increase responsiveness to local needs? - evidence from Bolivia," Policy Research Working Paper Series 2516, The World Bank.
- Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
- Beard, Victoria A., 2007. "Household Contributions to Community Development in Indonesia," World Development, Elsevier, vol. 35(4), pages 607-625, April.
- Besley, T. & Coate, S., 1991.
"Group Lending, Repayment Incentives And Social Collateral,"
152, Princeton, Woodrow Wilson School - Development Studies.
- Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
- Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
- Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.