IDEAS home Printed from https://ideas.repec.org/p/fre/wpaper/24.html
   My bibliography  Save this paper

Administrative overspending in Indonesian districts: The role of local politics

Author

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

    (Department of International Economic Policy, University of Freiburg)

Abstract

We analyze the determinants of the excessive administrative spending of local governments in Indonesia. In an unbalanced panel data set of 399 districts for 2001‐2009, we show that the proliferation of districts has not led to increased administrative spending; instead a lack of political accountability is responsible for this excess. The degree of political competition influences the level of administrative spending significantly; newly introduced direct elections of district heads, however, did not curtail the waste.

Suggested Citation

  • Bambang Suharnoko Sjahrir & Krisztina Kis-Katos & Guenther G. Schulze, 2013. "Administrative overspending in Indonesian districts: The role of local politics," Discussion Paper Series 24, Department of International Economic Policy, University of Freiburg, revised Jul 2013.
    • Handle: RePEc:fre:wpaper:24
    as

    Download full text from publisher

    File URL: https://www.iep.uni-freiburg.de/discussion-papers/repec/fre/wpaper/files/dp24_administrative_overspending_indonesia.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    2. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
    3. Ross Mcleod, 2005. "The struggle to regain effective government under democracy in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(3), pages 367-386.
    4. Bhattacharyya, Sambit & Hodler, Roland, 2010. "Natural resources, democracy and corruption," European Economic Review, Elsevier, vol. 54(4), pages 608-621, May.
    5. Lars-Erik Borge & Torberg Falch & Per Tovmo, 2008. "Public sector efficiency: the roles of political and budgetary institutions, fiscal capacity, and democratic participation," Public Choice, Springer, vol. 136(3), pages 475-495, September.
    6. Wang, Shuna & Yao, Yang, 2007. "Grassroots Democracy and Local Governance: Evidence from Rural China," World Development, Elsevier, vol. 35(10), pages 1635-1649, October.
    7. Cut Dian R.D. Agustina & Wolfgang Fengler & Günther G. Schulze, 2012. "The regional effects of Indonesia's oil and gas policy: options for reform," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 48(3), pages 369-397, December.
    8. Blane Lewis, 2006. "Local government taxation: An analysis of administrative cost inefficiency," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(2), pages 213-233.
    9. Galasso, Emanuela & Ravallion, Martin, 2005. "Decentralized targeting of an antipoverty program," Journal of Public Economics, Elsevier, vol. 89(4), pages 705-727, April.
    10. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    11. Bert Hofmann & Kai Kaiser & Günther G. Schulze, 2004. "Dezentralisierung und Korruption: erste Erfahrungen aus Indonesien," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 73(2), pages 226-246.
    12. Sjahrir, Bambang Suharnoko & Kis-Katos, Krisztina & Schulze, Günther G., 2013. "Political budget cycles in Indonesia at the district level," Economics Letters, Elsevier, vol. 120(2), pages 342-345.
    13. Robin Burgess & Matthew Hansen & Benjamin A. Olken & Peter Potapov & Stefanie Sieber, 2012. "The Political Economy of Deforestation in the Tropics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1707-1754.
    14. World Bank, 2007. "Spending for Development : Making the Most of Indonesia's New Opportunities, Indonesia Public Expenditure Review 2007," World Bank Publications - Reports 7816, The World Bank Group.
    15. Krisztina Kis-Katos & Günther G. Schulze, 2013. "Corruption in Southeast Asia: a survey of recent research," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 27(1), pages 79-109, May.
    16. Federico Revelli, 2010. "Spend more, get more? An inquiry into English local government performance," Oxford Economic Papers, Oxford University Press, vol. 62(1), pages 185-207, January.
    17. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 115(2), pages 200-249.
    18. Olken, Benjamin A., 2006. "Corruption and the costs of redistribution: Micro evidence from Indonesia," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 853-870, May.
    19. Rongen, Gunnar, 1995. "Efficiency in the provision of local public goods in Norway," European Journal of Political Economy, Elsevier, vol. 11(2), pages 253-264, June.
    20. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence from a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 679-705.
    21. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1243-1284.
    22. Pranab Bardhan, 2002. "Decentralization of Governance and Development," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 185-205, Fall.
    23. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    24. Fitria Fitrani & Bert Hofman & Kai Kaiser, 2005. "Unity in diversity? The creation of new local governments in a decentralising Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(1), pages 57-79.
    25. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
    26. Blane D. Lewis, 2005. "Indonesian Local Government Spending, Taxing and Saving: An Explanation of Pre‐ and Post‐decentralization Fiscal Outcomes," Asian Economic Journal, East Asian Economic Association, vol. 19(3), pages 291-317, September.
    27. Pranab Bardhan & Dilip Mookherjee, 2006. "Decentralisation and Accountability in Infrastructure Delivery in Developing Countries," Economic Journal, Royal Economic Society, vol. 116(508), pages 101-127, January.
    28. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    29. Seabright, Paul, 1996. "Accountability and decentralisation in government: An incomplete contracts model," European Economic Review, Elsevier, vol. 40(1), pages 61-89, January.
    30. World Bank, 2003. "Decentralizing Indonesia : A Regional Public Expenditure Review Overview Report," World Bank Publications - Reports 14632, The World Bank Group.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kis-Katos, Krisztina & Sjahrir, Bambang Suharnoko, 2017. "The impact of fiscal and political decentralization on local public investment in Indonesia," Journal of Comparative Economics, Elsevier, vol. 45(2), pages 344-365.
    2. Ivo Bischoff & Ferry Prasetyia, 2015. "Determinants of local public expenditures on education: empirical evidence for Indonesian districts between 2005 and 2012," MAGKS Papers on Economics 201532, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Lambsdorff Johann Graf & Schulze Günther G., 2015. "Guest Editorial: Special Issue on Corruption at the Grassroots-level: What Can We Know About Corruption?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(2), pages 100-114, April.
    4. Nathaniel Mason & Charles Oyaya & Julia Boulenouar, 2020. "Reforming urban sanitation under decentralization: Cross‐country learning for Kenya and beyond," Development Policy Review, Overseas Development Institute, vol. 38(1), pages 42-63, January.
    5. Cisneros, Elías & Kis-Katos, Krisztina & Nuryartono, Nunung, 2021. "Palm oil and the politics of deforestation in Indonesia," Journal of Environmental Economics and Management, Elsevier, vol. 108(C).
    6. Farah, Alfa, 2019. "Fiscal decentralization and electoral participation: Analyzing districts in Indonesia," CIW Discussion Papers 4/2019, University of Münster, Center for Interdisciplinary Economics (CIW).
    7. Estache, Antonio & Garsous, Grégoire & Seroa da Motta, Ronaldo, 2016. "Shared Mandates, Moral Hazard, and Political (Mis)alignment in a Decentralized Economy," World Development, Elsevier, vol. 83(C), pages 98-110.
    8. Ricks, Jacob I., 2016. "Building Participatory Organizations for Common Pool Resource Management: Water User Group Promotion in Indonesia," World Development, Elsevier, vol. 77(C), pages 34-47.
    9. Jahen F. Rezki, 2022. "Political competition and economic performance: evidence from Indonesia," Economics of Governance, Springer, vol. 23(2), pages 83-114, June.
    10. Blane D. Lewis & Adrianus Hendrawan, 2018. "The impact of mayor-council coalitions on local government spending, service delivery, and corruption in Indonesia," Departmental Working Papers 2018-19, The Australian National University, Arndt-Corden Department of Economics.
    11. Gonschorek, Gerrit J., 2021. "Subnational favoritism in development grant allocations: Empirical evidence from decentralized Indonesia," World Development, Elsevier, vol. 139(C).
    12. Lewis, Blane D. & Hendrawan, Adrianus, 2019. "The impact of majority coalitions on local government spending, service delivery, and corruption in Indonesia," European Journal of Political Economy, Elsevier, vol. 58(C), pages 178-191.
    13. Blane D. Lewis, 2017. "Local government spending and service delivery in Indonesia: the perverse effects of substantial fiscal resources," Regional Studies, Taylor & Francis Journals, vol. 51(11), pages 1695-1707, November.
    14. Ryan Edwards, 2015. "Is plantation agriculture good for the poor? Evidence from Indonesia's palm oil expansion," Departmental Working Papers 2015-12, The Australian National University, Arndt-Corden Department of Economics.
    15. Blane Lewis, 2016. "Local political fragmentation: Fiscal and service delivery effects in Indonesia," Departmental Working Papers 2016-16, The Australian National University, Arndt-Corden Department of Economics.
    16. Barde, Julia Alexa, 2017. "What Determines Access to Piped Water in Rural Areas? Evidence from Small-Scale Supply Systems in Rural Brazil," World Development, Elsevier, vol. 95(C), pages 88-110.
    17. Azis Iwan J. & Pratama Alvin, 2020. "Polarization and Local Conflicts in Post Decentralization Indonesia," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 26(2), pages 1-28, May.
    18. Gerrit J. Gonschorek, 2020. "Subnational Favoritism in Development Grant Allocations – Empirical Evidence from Decentralized Indonesia," Discussion Paper Series 38, Department of International Economic Policy, University of Freiburg, revised Feb 2020.
    19. Hal Hill, 2018. "Asia's Third Giant: A Survey of the Indonesian Economy," The Economic Record, The Economic Society of Australia, vol. 94(307), pages 469-499, December.
    20. Rezki, Jahen Fachrul, 2018. "Political Competition and Local Government Performance: Evidence from Indonesia," SocArXiv nekps, Center for Open Science.
    21. Julia Alexa Barde, 2014. "What Determines Access to Piped Water in Rural Areas?Evidence from Small-scale Supply Systems in Rural Brazil," Discussion Paper Series 30, Department of International Economic Policy, University of Freiburg, revised Dec 2014.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kis-Katos, Krisztina & Sjahrir, Bambang Suharnoko, 2017. "The impact of fiscal and political decentralization on local public investment in Indonesia," Journal of Comparative Economics, Elsevier, vol. 45(2), pages 344-365.
    2. Krisztina Kis-Katos & Günther G. Schulze, 2013. "Corruption in Southeast Asia: a survey of recent research," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 27(1), pages 79-109, May.
    3. Maarten Voors & Ty Turley & Erwin Bulte & Andreas Kontoleon & John A. List, 2018. "Chief for a Day: Elite Capture and Management Performance in a Field Experiment in Sierra Leone," Management Science, INFORMS, vol. 64(12), pages 5855-5876, December.
    4. Emilie Caldeira & Martial Foucault & Grégoire Rota-Graziosi, 2014. "Does Decentralization Facilitate Access to Poverty-Related Services? Evidence from Benin," NBER Chapters, in: African Successes, Volume I: Government and Institutions, pages 57-102, National Bureau of Economic Research, Inc.
    5. repec:hal:spmain:info:hdl:2441/7o52iohb7k6srk09ni5kl0m3m is not listed on IDEAS
    6. Gradstein, Mark, 2017. "Government decentralization as a commitment in non-democracies," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 110-118.
    7. Changwony, Frederick Kibon & Paterson, Audrey S., 2019. "Accounting practice, fiscal decentralization and corruption," The British Accounting Review, Elsevier, vol. 51(5).
    8. Lewis, Blane D. & Nguyen, Hieu T.M. & Hendrawan, Adrianus, 2020. "Political accountability and public service delivery in decentralized Indonesia: Incumbency advantage and the performance of second term mayors," European Journal of Political Economy, Elsevier, vol. 64(C).
    9. Gonschorek, Gerrit J. & Schulze, Günther G. & Sjahrir, Bambang Suharnoko, 2018. "To the ones in need or the ones you need? The political economy of central discretionary grants − empirical evidence from Indonesia," European Journal of Political Economy, Elsevier, vol. 54(C), pages 240-260.
    10. 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.
    11. Cisneros, Elías & Kis-Katos, Krisztina & Nuryartono, Nunung, 2021. "Palm oil and the politics of deforestation in Indonesia," Journal of Environmental Economics and Management, Elsevier, vol. 108(C).
    12. Keith Blackburn & Gareth Downing, 2015. "Deconcentration, Corruption and Economic Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 209, Economics, The University of Manchester.
    13. Francken, Nathalie & Minten, Bart & Swinnen, Johan F.M., 2009. "Media, Monitoring, and Capture of Public Funds: Evidence from Madagascar," World Development, Elsevier, vol. 37(1), pages 242-255, January.
    14. Pranab Bardhan & Dilip Mookherjee, 2005. "Decentralization, Corruption and Government Accountability: An Overview," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-152, Boston University - Department of Economics.
    15. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 115(2), pages 200-249.
    16. M A B Siddique & Heru Wibowo & Yanrui Wu, 2014. "Fiscal Decentralisation and Inequality in Indonesia: 1999-2008," Economics Discussion / Working Papers 14-22, The University of Western Australia, Department of Economics.
    17. Ivar Kolstad & Arne Wiig & Vincent Somville, 2014. "Devolutionary delusions? The effect of decentralization on corruption," CMI Working Papers 10, CMI (Chr. Michelsen Institute), Bergen, Norway.
    18. Pranab Bardhan, 2002. "Decentralization of Governance and Development," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 185-205, Fall.
    19. David Bartolini & Agnese Sacchi & Domenico Scalera & Alberto Zazzaro, 2018. "The closer the better? Institutional distance and information blurring in a political agency model," Mo.Fi.R. Working Papers 146, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    20. Kessing, Sebastian G., 2010. "Federalism and accountability with distorted election choices," Journal of Urban Economics, Elsevier, vol. 67(2), pages 239-247, March.
    21. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.

    More about this item

    Keywords

    administrative expenditures; decentralization; direct elections; Indonesia;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fre:wpaper:24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Günther G. Schulze (email available below). General contact details of provider: https://edirc.repec.org/data/wffrede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.