Spatial Decentralization and Program Evaluation: Theory and an Example from Indonesia
This paper proposes a novel instrumental variable method for program evaluation that only requires a single cross-section of data on the spatial intensity of programs and outcomes. The instruments are derived from a simple theoretical model of government decision-making in which governments are responsive to the attributes of places and their populations, rather than to the attributes of individuals, in making allocation decisions across space, and have a social welfare function that is spatially weakly separable, that is, that the budgeting process is multi-stage with respect to administrative districts and sub-districts. The spatial instrumental variables model is then estimated and tested by GMM with a single cross-section of Indonesian census data. The results offer support to the identification strategy proposed.
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- Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007.
"Enhanced routines for instrumental variables/GMM estimation and testing,"
CERT Discussion Papers
0706, Centre for Economic Reform and Transformation, Heriot Watt University.
- Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/GMM estimation and testing," Boston College Working Papers in Economics 667, Boston College Department of Economics, revised 05 Sep 2007.
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- Conley, Timothy G & Ligon, Ethan, 2002. " Economic Distance and Cross-Country Spillovers," Journal of Economic Growth, Springer, vol. 7(2), pages 157-87, June.
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