Resource Windfalls and Local Government Behavior: Evidence from a Policy Reform in Indonesia
Sammanfattning
We analyze the impact of a natural experiment in Indonesia that allocated certain district
governments with a windfall revenue from natural resource production. Our identification is
based on a comparison between bordering districts in provinces that received the windfall with those that did not receive it, before and after the fiscal reform in 1999. We study the impact on a range of outcome variables such as regional GDP, infrastructure quality, employment,
education, and household consumption. Our results demonstrate a "flypaper effect" in the
sense that the increased revenue led to higher spending without any lowering of local taxes.
We argue that the large relative increases in spending on public services contributed to a
very strong increase in local GDP levels, led by the agricultural sector. A 100-dollar windfall
further increased literacy by about 2 percent and non-food consumption by 67 USD. The strong general tendency of positive effects from the reform stands in contrast to the negative effects emphasized in the resource curse literature.
Övrig beskrivning
JEL: H72, O20, Q33
Samlingar
Fil(er)
Datum
2015-11Författare
Olsson, Ola
Valsecchi, Michele
Nyckelord
Resource windfalls
scal decentralization
Indonesia
Publikationstyp
report
ISSN
1403-2465
Serie/rapportnr.
Working Papers in Economics
635
Språk
eng