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Does better local governance improve district growth performance in Indonesia?

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  • Neil McCulloch

    ()
    (Institute of Development Studies (IDS), University of Sussex)

  • Edmund Malesky

    ()
    (Graduate School of International Relations and Pacific Studies, \sUniversity of California)

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    Abstract

    A large literature suggests that countries with better governance have higher growth rates. We explore whether this is also true at the sub-national level in Indonesia. We exploit a new dataset of firm perceptions of the quality of economic governance in 243 districts across Indonesia to estimate the impact of nine different dimensions of governance on district growth. Surprisingly, we find relatively little evidence of a robust relationship between the quality of governance and economic performance. However, we do find support for the idea that structural variables, such as economic size, natural resource endowments and population, have a direct influence on the quality of local governance as well as on economic growth. This suggests that efforts to improve local governance should pay greater attention to understanding how such structural characteristics shape the local political economy and how this in turn influences economic performance.

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    Bibliographic Info

    Paper provided by Department of Economics, University of Sussex in its series Working Paper Series with number 1711.

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    Date of creation: Feb 2011
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    Handle: RePEc:sus:susewp:1711

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    Keywords: governance; institutions; economic performance; economic growth;

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