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Political Competition and Economic Performance: Evidence from Indonesia

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  • Jahen F. Rezki

    (Department of Economics, Universitas Indonesia and LPEM-FEBUI)

Abstract

This paper analyses the impact of political competition on district government performance in Indonesia. This study uses a new database that covers 427 districts in Indonesia, from 2000 to 2013. Political competition is measured using the Herfindahl Hirschman Concentration Index for the district parliament election. This variable is potentially endogenous, because political competition is likely to be non-random and correlated with unobservable variables. To solve this problem, I use the lag of the average political competition within the same province and the political competition from the 1955 general election, as instrumental variables for political competition. The degree of political competition has been found to boost real Regional Gross Domestic Product (RGDP) per capita and RGDP growth by 3.24% and 1.11%, respectively . This study also find that stiffer political competition is associated with higher public spending (e.g. infrastructure spending) and pro-business policies.

Suggested Citation

  • Jahen F. Rezki, 2020. "Political Competition and Economic Performance: Evidence from Indonesia," LPEM FEBUI Working Papers 202046, LPEM, Faculty of Economics and Business, University of Indonesia, revised 2020.
    • Handle: RePEc:lpe:wpaper:202046
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    More about this item

    Keywords

    Political Competition — Regional Government — Indonesia — Economic Performance;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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