Open AccessDoes Better Local Governance Improve District Growth Performance in Indonesia?
Author(s) -
McCulloch Neil,
Malesky Edmund
Publication year - 2011
Publication title -
ids working papers
Language(s) - English
Resource type - Journals
eISSN - 2040-0209
pISSN - 1353-6141
DOI - 10.1111/j.2040-0209.2011.00369_2.x
Subject(s) - corporate governance , exploit , quality (philosophy) , natural resource , population , natural experiment , economics , business , good governance , development economics , politics , resource (disambiguation) , economic system , political science , finance , computer network , philosophy , statistics , demography , computer security , mathematics , epistemology , sociology , computer science , law
Summary 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.