Inflation-Output Efficiency in Lowering High Cost Economy: A Comparative Study of Several Provinces in Indonesia

Betta Y., Eugenia Mardanugraha and Chaikal Nuryakin

Economics and Finance in Indonesia, 2007, vol. 55, 135-147

Abstract: As more countries embrace decentralization, economists have been debating its impact on economic growth. They use both single and cross country empirical data and find mixed evidences. Indonesia is one recent example of country’s migration transition from a centralized regime to a decentralized one. It is unique for its scope, scale and time of preparation. The country had only less than two years of preparation to abandon three decades of a centralized system. Decentralization meant that the central government devolved almost all public service functions all at once to 367 sub-provincial (district) governments. This paper presents the evidence of decentralization’s impact on growth in Indonesia. We use two decentralization measures: own source revenue ratio and expenditure ratio, and examine their impact on growth by using panel data covering the 1991 to 2005 period. We find that in Indonesia, hitherto, fiscal decentralization has a negative impact on growth

Keywords: Inflation; Economic Growth; Efficient (search for similar items in EconPapers)
JEL-codes: E31 O40 O47 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:lpe:efijnl:200708

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