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An investigation of the resource curse in Indonesia

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  • Hilmawan, Rian
  • Clark, Jeremy

Abstract

We investigate the effect of resource dependence on district level income in a rare within-country study for Indonesia, one of the largest resource producing countries in Asia. We follow 390 districts between 2006 and 2015, consider four alternative measures of resource dependence, and instrument for the potential endogeneity of each using historical measures of oil, gas and coal reserve locations, and changes in the physical production of each resource. Using annual fixed effects and first differenced regressions with and without various instruments, we find no evidence of a “resource curse”. Instead, we find robust evidence across all models that dependence as measured by mining's share of output is positively associated with district real per capita income. We find a similar positive relationship between dependence as measured by the share of district government revenues from oil and gas or mining overall, and income in our most credible specifications with instruments. For example, a standard deviation increase in change in district government dependence on oil/gas revenues increases real per capita income by 16 percent over a nine year period.

Suggested Citation

  • Hilmawan, Rian & Clark, Jeremy, 2019. "An investigation of the resource curse in Indonesia," Resources Policy, Elsevier, vol. 64(C).
  • Handle: RePEc:eee:jrpoli:v:64:y:2019:i:c:s0301420719303411
    DOI: 10.1016/j.resourpol.2019.101483
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    Cited by:

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    More about this item

    Keywords

    Resource dependence; Resource abundance; Mining; Oil; Gas; Coal; Economic growth; Decentralisation;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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