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Sources of spatial welfare disparities in Indonesia: Household endowments or returns?

  • Skoufias, Emmanuel
  • Olivieri, Sergio

This article investigates (i) the extent to which the differences in the standard of living among districts in Indonesia are due to differences in the marginal welfare gains (returns) associated with household mobile endowments or differences in household endowments themselves; and (ii) whether the current allocation of fiscal expenditures by the central authorities is related to the main determinants of the spatial disparities in welfare among districts. Differences in the returns to household mobile characteristics are found to be the primary explanation of the welfare differences. The allocation of fiscal transfers to districts is found to be based on “needs” defined as low returns to household mobile endowments. This also suggests that the design of the fiscal transfer system is consistent with promoting the opportunities for welfare across districts as opposed to equalizing the level of welfare itself. Finally, the marginal welfare gains of most household mobile endowments are found to be higher in districts with more roads.

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Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 29 (2013)
Issue (Month): C ()
Pages: 62-79

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Handle: RePEc:eee:asieco:v:29:y:2013:i:c:p:62-79
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  1. McCulloch, Neil & Sjahrir, Bambang Suharnoko, 2008. "Endowments, location or luck ? evaluating the determinants of sub-national growth in decentralized Indonesia," Policy Research Working Paper Series 4769, The World Bank.
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  8. Skoufias, Emmanuel & Narayan, Ambar & Dasgupta, Basab & Kaiser, Kai, 2011. "Electoral accountability, fiscal decentralization and service delivery in Indonesia," Policy Research Working Paper Series 5614, The World Bank.
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  12. Emmanuel Skoufias & Roy S. Katayama, 2011. "Sources of welfare disparities between and within regions of Brazil: evidence from the 2002--2003 household budget survey (POF)," Journal of Economic Geography, Oxford University Press, vol. 11(5), pages 897-918, September.
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  14. World Bank, 2003. "Decentralizing Indonesia : A Regional Public Expenditure Review Overview Report," World Bank Other Operational Studies 14632, The World Bank.
  15. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
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