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Political Business Cycles in Local Indonesia

Author

Listed:
  • Bambang Suharnoko Sjahrir
  • Krisztina Kis-Katos
  • Guenther G. Schulze

    () (Department of International Economic Policy, University of Freiburg)

Abstract

We study political business cycles (PBC) in newly democratized and decentralized Indonesia at the local level. As the timing of indirect and later on direct elections of district heads differs exogenously across jurisdictions, the political business cycle effect is clearly identified. Our data allow distinguishing PBCs for indirect and direct elections. We find significant budget cycles for discretionary budget categories at the disposal of the district head (not for the overall budget) only for direct elections, not for indirect elections. These cycles are much larger if the incumbent runs for reelection. Our results underline the conditional nature of PBC.

Suggested Citation

  • Bambang Suharnoko Sjahrir & Krisztina Kis-Katos & Guenther G. Schulze, 2013. "Political Business Cycles in Local Indonesia," Discussion Paper Series 23, Department of International Economic Policy, University of Freiburg, revised Apr 2013.
  • Handle: RePEc:fre:wpaper:23
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    File URL: http://www.vwl-iwipol.uni-freiburg.de/iwipol/REPEC/fre/wpaper/DP23_Sjahrir_Kis-Katos_Schulze_Political_Business_Cycles_in_Local_Indonesia.pdf
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    Cited by:

    1. Moricz, Sara & Sjöholm, Fredrik, 2014. "The Effect of Elections on Economic Growth: Results from a Natural Experiment in Indonesia," Working Papers 2014:15, Lund University, Department of Economics.
    2. Skoufias, Emmanuel & Narayan, Ambar & Dasgupta, Basab & Kaiser, Kai, 2014. "Electoral accountability and local government spending in Indonesia," Policy Research Working Paper Series 6782, The World Bank.

    More about this item

    Keywords

    Political business cycles; Indonesia; local elections; direct and indirect elections;

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories

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