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 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.

Bibliographic Details

Main Authors:	McCulloch, Neil, Sjahrir, Bambang Suharnoko
Language:	English
Published:	World Bank, Washington, DC 2008-11
Subjects:	AGRICULTURE, ANNUAL GROWTH, ANNUAL GROWTH RATE, AVERAGE ANNUAL, AVERAGE ANNUAL GROWTH, AVERAGE GROWTH, AVERAGE GROWTH RATE, BASE YEAR, DATA ISSUES, DECENTRALIZATION, DECOMPOSABLE INEQUALITY MEASURES, DEPENDENT VARIABLE, DESCRIPTIVE STATISTICS, DETERMINANTS OF GROWTH, DETERMINING GROWTH, DEVELOPING COUNTRIES, DEVELOPMENT REPORT, DIFFERENTIAL IMPACT, DISTRIBUTIVE POLITICS, ECONOMETRIC ANALYSIS, ECONOMIC ACTIVITIES, ECONOMIC ACTIVITY, ECONOMIC CONCENTRATION, ECONOMIC CONDITIONS, ECONOMIC DEVELOPMENT, ECONOMIC GEOGRAPHY, ECONOMIC GROWTH, ECONOMIC LITERATURE, ECONOMIC OPPORTUNITIES, ECONOMIC PERFORMANCE, ECONOMIC POLICY, ECONOMIC PROGRAMS, ECONOMIC STRUCTURE, ECONOMIC STUDIES, ECONOMICS, EMPIRICAL ANALYSIS, ERROR TERM, ESTIMATION RESULTS, EXPLANATORY VARIABLES, FACTOR ENDOWMENTS, FINANCIAL CRISIS, FINANCIAL SECTOR, FIXED EFFECTS, FOREIGN INVESTMENT, GDP, GDP PER CAPITA, GEOGRAPHIC CONCENTRATION, GEOGRAPHICAL DETERMINANTS, GINI COEFFICIENT, GOVERNMENT EXPENDITURE, GROWTH ACCELERATIONS, GROWTH DETERMINANTS, GROWTH IMPACT, GROWTH MODEL, GROWTH PERFORMANCE, GROWTH PERIOD, GROWTH PROCESS, GROWTH RATE, GROWTH RATES, GROWTH REGRESSIONS, GROWTH THEORY, GROWTH TRAGEDY, HETEROSKEDASTICITY, HIGH GROWTH, HUMAN CAPITAL, INCOME CONVERGENCE, INCOME INEQUALITY, INCREASING INEQUALITY, INDUSTRIALIZATION, INEQUALITY MEASURES, LABOR FORCE, LANDLOCKED COUNTRIES, LONG RUN, LONG-RUN GROWTH, MEAN GROWTH, MEASUREMENT ERROR, NATURAL RESOURCES, NEOCLASSICAL GROWTH, NEOCLASSICAL GROWTH THEORY, PANEL REGRESSIONS, PER CAPITA CONSUMPTION, PER CAPITA EXPENDITURE, PER CAPITA GROWTH, POLICY RESEARCH, POLICY VARIABLES, POPULATION DATA, POPULATION SHARE, POSITIVE EFFECT, POSITIVE RELATIONSHIP, POVERTY RATES, POVERTY REDUCTION, REAL GDP, REAL INCOME, REGIONAL GROWTH, REGRESSION RESULTS, RELATIVE INCOME, RESOURCE ENDOWMENTS, SECONDARY SCHOOLING, SECTORAL COMPOSITION, SIGNIFICANT EFFECT, SOCIOECONOMIC INDICATORS, SPATIAL ECONOMICS, STANDARD DEVIATION, STRUCTURAL BREAK, TRANSACTION COSTS, UNIT OF CAPITAL, WATER SUPPLY,
Online Access:	http://documents.worldbank.org/curated/en/2008/11/9993318/endowments-location-or-luck-evaluating-determinants-sub-national-growth-decentralized-indonesia https://hdl.handle.net/10986/6906
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