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Regional convergence and the role of the neighbourhood effect in decentralised Indonesia

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  • Yogi Vidyattama

Abstract

More than a decade since Indonesia's radical decentralisation process commenced, this article examines whether the economic performance of neighbouring regions -- the neighbourhood effect -- can determine the speed of regional convergence. The results suggest that the inequality of gross regional domestic product per capita, as indicated by the Williamson index of regional inequality, may increase slightly in times of insignificant estimated speeds of convergence -- especially because of the growth of Jakarta. In contrast, changes in the Human Development Index numbers for Indonesia indicate that regional convergence is taking place, although its speed is decreasing. The neighbourhood effect could be significant in both cases, but it has had little effect on the speed of convergence.

Suggested Citation

  • Yogi Vidyattama, 2013. "Regional convergence and the role of the neighbourhood effect in decentralised Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 49(2), pages 193-211, August.
    • Handle: RePEc:taf:bindes:v:49:y:2013:i:2:p:193-211
    DOI: 10.1080/00074918.2013.809841
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    References listed on IDEAS

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    1. Bambang Brodjonegoro & Jorge Martinez-Vazquez, 2004. "An Analysis of Indonesia's Transfer System: Recent Performance and Future Prospects," Chapters, in: James Alm & Jorge Martinez-Vazquez & Sri Mulyani Indrawati (ed.), Reforming Intergovernmental Fiscal Relations and the Rebuilding of Indonesia, chapter 8, Edward Elgar Publishing.
    2. 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.
    3. Daniel Suryadarma & Wenefrida Dwi Widyanti & Asep Suryahadi & Sudarno Sumarto, "undated". "From Access to Income: Regional and Ethnic Inequality in Indonesia," Working Papers 356, Communications Section.
    4. World Bank, 2003. "Decentralizing Indonesia : A Regional Public Expenditure Review Overview Report," World Bank Publications - Reports 14632, The World Bank Group.
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