Decentralization and Citizen Perception of Prosperity in Indonesia

Authors

  • Nanda Wijayanti Accounting Department, Faculty of Economics and Business, Universitas Indonesia
  • Matthew Mingus School of Public Affairs and Administration, Western Michigan University

DOI:

https://doi.org/10.26740/jaj.v14n1.p80-94

Keywords:

administrative decentralization , citizen perceptions of prosperity, fiscal decentralization, local elections

Abstract

This article contributes to research on the impact of decentralisation reforms on local and regional prosperity. Researchers argue that implementing decentralization reforms can encourage citizens to participate in policy making. To test the idea, this study examines the relationship between fiscal decentralisation, administrative autonomy, direct local elections, and citizen prosperity using the Indonesia Family Live Survey (IFLS) 2007. IFLS is a longitudinal survey that uses face-to-face interviews with adult Indonesians (N individuals = 29,000, N districts = 262). Using ordered logistic regression, we find that fiscal and administrative decentralisation increases the probability that citizens feel prosperous, while direct local elections do not appear to have this effect. This relationship is stronger when the decentralisation reform is conducted in a less-corrupt institutional environment. The findings suggest that decentralisation in the weak political system may improve local prosperity through the improved capacity of Indonesian districts to deliver public services rather than through the opportunities for citizens to participate in local elections

References

Alesina, A., Di Tella, R., & MacCulloch, R. (2004). Inequality and happiness: Are Europeans and Americans different? Journal of Public Economics, 88(9-10), 2009-2042.

Andrews, M., & Shah, A. (2003). Towards citizens entered local-level budgets in developing countries. In Handbook on Public Sector Performance Reviews (Vol. 3) Bringing Civility in Governance, Shah A., (ed.). World Bank: Washington, DC.

Aritenang, A. (2011). A study on Indonesia regions disparity: Post decentralisation. Social Science Research Network. http://dx.doi.org/10.2139/ssrn.1737977.

Aspinall, E. (2010). The irony of success. Journal of Democracy, 21(2), 20–34. http://dx.doi.org/10.1353/jod.0.0157.

Aspinall, E., & Van Klinken, G. (2011). The State and Illegality in Indonesia. Brill: Boston.

Bardhan, P., & Mookherjee, D. (2006). Pro-poor targeting and accountability of local governments in West Bengal. Journal of Development Economics, 79(2), 303–327.

Brodjonegoro, B. (2004). The effects of decentralisation on business in Indonesia. Business in Indonesia, New Challenges, Old Problems. Institute of Southeast Asian Studies: Singapore.

Buser, W. (2011). The impact of fiscal decentralisation on economic performance in High-Income OECD nations: An institutional approach. Public Choice, 149(1), 31–48. http://dx.doi.org/10.1007/s11127-011-9827-6.

Canaleta, C. G. (2004). Regional economic disparities and decentralization. Urban Studies, 41(1), 71-95.

Choi, N. (2004). Local elections and party politics in post-reform Indonesia: A view from Yogyakarta. Contemporary Southeast Asia, 26(2), 280–301.

Diener, E., Sandvik, E., Seidlitz, L., & Diener, M. (1993). The relationship between income and subjective well-being: Relative or absolute? Social Indicators Research, 28(3), 195-223.

Dillinger, W. (1994). Decentralisation and its implications for the urban services delivery. Urban Management and Municipal Finance Discussion Paper No. 16. World Bank: Washington, DC.

Ebel, R. D., & Yilmaz, S. (2002). On the measurement and impact of fiscal decentralisation. Policy Research Working Paper Series No. 2809. World Bank: Washington, DC.

Eckart, S. (2008). Political accountability, fiscal conditions and local government performance – Cross-sectional evidence from Indonesia. Public Administration and Development, 28(1), 1–17.

Ezcurra, R., & Pascual, P. (2008). Fiscal decentralisation and regional disparities: Evidence from several European Union countries. Environment and Planning, A40(5), 1185-1201.

Faguet, J. P. (2004). Does decentralisation increase government responsiveness to local needs? Evidence from Bolivia. Journal of Public Economics, 88(3), 867-893.

Faust, J., & Harbers, I. (2012). On the local politics of administrative decentralisation: Applying for policy responsibilities in Ecuador. Publius, 42(1), 52-77.

Fisman, R., & Gatti, R. (2002). Decentralisation and corruption: Evidence across countries. Journal of Public Economics, 3(83), 325-345.

Fox, J., & Aranda, J. (1996). Decentralisation and rural development in Mexico: Community participation in Oaxaca's municipal funds' program. Monograph Series No. 42, Center for U.S.-Mexican Studies, University of California at San Diego. Available at http://escholarship.org/uc/item/5jk3b9gt#page-1. (Accessed: December 27th, 2015).

Frankenberg, E., & Thomas, D. (2000). The Indonesian Family Life Survey: Study design and results from waves 1 and 2. DRU-2238/1-NIA/NICHD. Available at http://www.vanneman.umd.edu/socy699j/ifls2design.pdf. (Accessed: February 18th, 2015).

Frey, B. S., & Stutzer, A. (2010). Happiness and Economics: How the economy and institutions affect human well-being. Princeton University Press: Princeton, NJ.

Gao, S., Meng, X., & Zhang, L. (2014). Fiscal decentralisation and life satisfaction: Evidence from Urban China. Social Indicators Research, 119(3), 1177–1194. http://dx.doi.org/10.1007/s11205-013-0552-z.

Gemmell, N., Kneller, R., & Sanz, I. (2013). Fiscal decentralisation and economic growth: Spending versus revenue decentralisation. Economic Inquiry, 51(4), 1915–1931.

Grindle, M. S. (2007). Going local: Decentralisation, democratisation, and the promise of good governance. Princeton University Press: Princeton, NJ.

Hadiz, V.R. (2004). Decentralisation and democracy in Indonesia: A critique of neo-institutionalist perspectives. Development and Change, 35(4), 697-718.

Hankla, C.R. (2009). When is fiscal decentralisation good for governance? Publius, 39(4), 632-650.

Hofman, B., & Kaiser, K. (2002). The Making of the big bang and its aftermath: A political economy perspective. Paper presented at Can Decentralization Help Rebuild Indonesia? conference, Andrew Young School of Policy Studies, Georgia State University, Atlanta.

Jin, H., Qian, Y., & Weingast, B. (2005). Regional decentralisation and fiscal incentives: Federalism, Chinese Style. Journal of Public Economics, 89(9), 1719-1742.

Kim, S., & Kim, D. (2012). Does government make people happy? Exploring new research directions for government's roles in happiness. Journal of Happiness Studies, 13(5), 875-899.

Kyriacou, A.P., Muinelo-Gallo, L., & Roca-Sagalés, O. (2015). Fiscal decentralisation and regional disparities: The importance of good governance. Papers in Regional Science, 94(1), 89-107. https://doi.org/10.1111/pirs.12061.

Lewis, B. D., & Chakeri, J. (2004). Central development spending in the regions post-decentralisation. Bulletin of Indonesian Economic Studies, 40(3), 379-394.

Linder, W. (2010). On the merits of decentralisation in young democracies. Publius, 40(1), 1–30.

Manzetti, L., & Wilson, C.J. (2007). Why do corrupt governments maintain public support? Comparative Political Studies, 40(8), 949-970.

Ministry of Home Affairs. (2006). The number of local elections in Indonesia from 2005-2014 [original in Indonesian]. http://otda.kemendagri.go.id/images/file/data_dan_informasi/seputar_otda/4.%20Rekap%20Pilkada%202005%20s.d%202014.pdf. (Accessed: August 4th, 2015).

Nurcholis, H. (2005). Teori dan Praktek Pemerintahan dan Otonomi Daerah [original in Indonesian]. PT Grasindo: Jakarta.

Oates, W.E. (2006). On the Theory and Practice of Fiscal Decentralisation. Institute for Federalism and Intergovernmental Relations, University of Kentucky, Working Paper No. 2006-05. Available at https://ideas.repec.org/p/ifr/wpaper/2006-05.html.

Plateau, J.P. (2004). Monitoring elite capture in community‐driven development. Development and Change, 35(2), 223-246.

RAND Corporation. (2015). The Indonesian Family Life Survey. Available at http://www.rand.org/labor/FLS/IFLS.html.

Rodríguez-Pose, A., & Ezcurra, R. (2010). Does decentralisation matter for regional disparities? A cross-country analysis. Journal of Economic Geography, 10(5), 619-644.

Rondinelli, D., Nellis, J.R., & Cheema, G.S. (1984). Decentralisation in developing countries: A review of recent experience. World Bank: Washington, DC.

Schneider, A. (2003). Decentralisation: Conceptualisation and measurement. Studies in Comparative International Development, 38(3), 32–56.

Seabright, P. (1996). Accountability and decentralisation in government: An incomplete contracts model. European Economic Review, 40(1), 61–89.

Sjahrir, B.S., Kis-Katos, K., & Schulze, G.G. (2014). Administrative overspending in Indonesian districts: The role of local politics. World Development, 59(c), 166-183.

Smoke, P. (2015). Rethinking decentralisation: Assessing challenges to a popular public sector reform. Public Administration and Development, 35(2), 97–112. https://doi.org/10.1002/pad.1703.

Steiner, S. (2005). Decentralisation and poverty reduction: A conceptual framework for the economic impact. GIGA Working Paper #3. http://dx.doi.org/10.2139/ssrn.907265. (Accessed: August 4th, 2015).

Sujarwoto, S. (2012). Political decentralisation and local public services performance in Indonesia. Journal of Public Administration and Governance, 2(3), 55–84.

Sujarwoto, S., & Tampubolon, G. (2015). Decentralisation and citizen happiness: A multilevel analysis of self-rated happiness in Indonesia. Journal of Happiness Studies, 16(2), 455-475.

Tiebout, C. (1956). A pure theory of local expenditures. Journal of Political Economy, 64(5), 416–424.

Thomas, D., Witoelar, F., Frankenberg, E., Sikoki, B., Strauss, J., Sumantri, C., & Suriastini, W. (2012). Cutting the costs of attrition: Results from the Indonesia Family Life Survey. Journal of Development Economics, 98(1), 108-123.

Transparency International. (1995). New Zealand Best, Indonesia Worst in World Poll of International Corruption (Press release).http://www.transparency.org/files/content/tool/1995_CPI_EN.pdf. (Accessed: August 4th, 2015).

Transparency International. (2015). Corruption Perception Index Web Page. http://www.transparency.org/research/cpi/cpi_2005/0/. (Accessed: December 27th, 2015)

Voigt, S., & Blume, L. 2009. The economic effects of federalism and decentralisation – A cross-country assessment. CESifo Working Paper No. 2766. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1307169. (Accessed: June 27th, 2015.

U.S. Agency for International Development (USAID). 2006. Fighting poverty through fiscal decentralisation. USAID: Washington, DC.

Ward, P.M., & Rodríguez, V.E. (2000). New federalism and state government in Mexico: Bringing the states back in. U.S.-Mexican Policy Report No. 9, Lyndon B. Johnson School of Public Affairs, The University Texas at Austin, Austin, TX.

World Bank. 2003. Decentralising Indonesia: A Regional Public Expenditure Review Overview Report.Washington, DC.

World Bank. 2008. Spending for Development: Making the most of Indonesia's new opportunities. Washington, DC.

Zhang, T., & Zou, H. (1998). Fiscal decentralisation, public spending, and economic growth in China. Journal of Public Economics, 67(2), 221–241.

Downloads

Published

2022-09-30

How to Cite

Wijayanti, N., & Mingus, M. (2022). Decentralization and Citizen Perception of Prosperity in Indonesia. AKRUAL: Jurnal Akuntansi, 14(1), 80–94. https://doi.org/10.26740/jaj.v14n1.p80-94
Abstract views: 270 , PDF Downloads: 212