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An Investigation of the Resource Curse in Indonesia

Rian Hilmawan and Jeremy Clark ()

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: We investigate the effect of resource dependence on district level income in a rare within-country study for Indonesia, one of the largest resource producing countries in Asia. We follow 390 districts between 2006 and 2015, consider four alternative measures of resouce dependence, and instrument for the potential endogeneity of each using historical measures of oil, gas and coal reserve locations, and changes in the physical production of each resource. Using annual fixed effects and first differenced regressions with and without various instruments, we find no evidence of a "resource curse". Instead, we find robust evidence across all models that dependence as measured by mining's share of output is positively associated with district real per capita income. We find a similar positive relationship between dependence as measured by the share of district government revenues from oil and gas or mining overall, and income in our most credible specifications with instruments. For example, a standard deviation increase in change in district government dependence on oil/gas revenues increases real per capita income by 16 percent over a nine year period.

Keywords: Resource dependence; resource abundance; mining; oil; gas; coal; economic growth; decentralization (search for similar items in EconPapers)
JEL-codes: Q32 Q33 Q38 O47 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2018-09-01
New Economics Papers: this item is included in nep-ene and nep-sea
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Journal Article: An investigation of the resource curse in Indonesia (2019) Downloads
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