Does better local governance improve district growth performance in Indonesia
Abstract
A large literature suggests that countries with better governance have higher growth rates.
We explore whether this is also true at the sub-national level in Indonesia. We exploit a new
dataset of firm perceptions of the quality of economic governance in 243 districts across
Indonesia to estimate the impact of nine different dimensions of governance on district
growth. Surprisingly, we find relatively little evidence of a robust relationship between the
quality of governance and economic performance. However, we do find support for the idea
that structural variables, such as economic size, natural resource endowments and
population, have a direct influence on the quality of local governance as well as on economic
growth. This suggests that efforts to improve local governance should pay greater attention
to understanding how such structural characteristics shape the local political economy and
how this in turn influences economic performance.
Keywords: economic growth; Indonesia; decentralisation; investment climate; governance;
private sector.
Citation
McCulloch, N. & E. Malesky (2011) Does better local governance improve district growth performance in Indonesia. Working paper series, 369. Brighton: IDS.Is part of series
IDS working papers;369Rights holder
Institute of Development StudiesCollections
- IDS Research [1614]