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Endowments, location or luck ? evaluating the determinants of sub-national growth in decentralized Indonesia

Author

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  • McCulloch, Neil
  • Sjahrir, Bambang Suharnoko

Abstract

Indonesia's"big bang"decentralization in 2001 shifted much of the responsibility for local economic development from central government to district and city governments, which today number more than 450. But the performance of these districts has varied widely. This paper attempts to understand the determinants of sub-national (district/city) growth in Indonesia and map how these determinants have changed since before the 1997/98 economic crisis. The authors exploit a rich dataset that includes a wide range of district-level characteristics, including education, population, cultural, economic, and infrastructure variables, as well as a set of variables relating to distance, to try to explain growth. The analysis finds that, after accounting for differences in other variables, poorer districts tend to grow faster than better off districts. Similarly, there is evidence of spatial divergence, in the sense that districts tend to grow faster if their neighbors are growing quickly. However, the quality of the existing district-level data makes it difficult to identify whether endowments or factors related to distance are systematically associated with growth.

Suggested Citation

  • 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.
  • Handle: RePEc:wbk:wbrwps:4769
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    References listed on IDEAS

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    1. World Bank, 2006. "Making the New Indonesia Work for the Poor," World Bank Other Operational Studies 8172, The World Bank.
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    6. Armida Alisjahbana & Arief Anshory Yusuf, 2003. "Assessing Indonesia's sustainable development: long-run trend, impact of the crisis, and adjustment during the recovery period," Working Papers in Economics and Development Studies (WoPEDS) 200306, Department of Economics, Padjadjaran University, revised Oct 2003.
    7. Catin, Maurice & Luo, Xubei & Van Huffel, Christophe, 2005. "Openness, industrialization, and geographic concentration of activities in China," Policy Research Working Paper Series 3706, The World Bank.
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    10. repec:wbk:wbpubs:28050 is not listed on IDEAS
    11. Jorge Garcia Garcia & Lana Soelistianingsih, 1998. "Why Do Differences in Provincial Incomes Persist in Indonesia?," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(1), pages 95-120.
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    Citations

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    Cited by:

    1. Skoufias, Emmanuel & Olivieri, Sergio, 2013. "Sources of spatial welfare disparities in Indonesia: Household endowments or returns?," Journal of Asian Economics, Elsevier, vol. 29(C), pages 62-79.
    2. Neil McCulloch & Edmund Malesky, 2011. "Does better local governance improve district growth performance in Indonesia?," Working Paper Series 1711, Department of Economics, University of Sussex.
    3. 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).
    4. Edwards, Ryan B., 2016. "Mining away the Preston curve," World Development, Elsevier, vol. 78(C), pages 22-36.
    5. Yogi Vidyattama, 2016. "Inter-provincial migration and 1975–2005 regional growth in Indonesia," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 87-105, March.
    6. 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.
    7. Jennifer Day & Peter Ellis, 2013. "Growth in Indonesia's manufacturing sectors: Urban and localization contributions," Regional Science Policy & Practice, Wiley Blackwell, vol. 5(3), pages 343-368, August.

    More about this item

    Keywords

    Achieving Shared Growth; Economic Growth; Economic Theory&Research; Inequality; Nutrition;

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