Capital Fundamentalism and Structural Transformation

Achmad Tohari (), Christopher Parsons () and Anu Rammohan ()
Additional contact information
Achmad Tohari: University of Western Australia
Christopher Parsons: University of Western Australia
Anu Rammohan: University of Western Australia

No 14444, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We revisit the role of Capital Fundamentalism, in the context of the Government of Indonesia's Inpres Desa Tertinggal (IDT or Left Behind Village) Program, which injected capital into poor village economies. We evaluate the impact of the program on village welfare and structural transformation adopting a (fuzzy) regression discontinuity design, which exploits village eligibility for identification. Welfare increased in rural as opposed to urban villages in Java, Sumatra and Bali and Nusa Tenggara, as households exited agriculture in favor of more productive activities in construction, industry and trade. We find no evidence that the program affected structural transformation or welfare in Kalimantan, Sulawesi or Papua, which suggests that structural transformation is a necessary condition for capital injections to foster village development.

Keywords: capital fundamentalism; structural transformation; government intervention; welfare (search for similar items in EconPapers)
JEL-codes: E22 H53 H54 I38 L16 O10 O18 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2021-06
New Economics Papers: this item is included in nep-dev, nep-mac and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://docs.iza.org/dp14444.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp14444

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().