Endowments, Location or Luck? Evaluating the Determinants of Sub-National Growth in Decentralized Indonesia
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 the...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/11/9993318/endowments-location-or-luck-evaluating-determinants-sub-national-growth-decentralized-indonesia http://hdl.handle.net/10986/6906 |
| Summary: | 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. |
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