Essays on the Political Economy of Development

This thesis presents essays on the political economy of development in Indonesia. It consists of three chapters exploring some of the important aspects in the political economy literature.

Chapter 2 asks how does political competition in a newly democratised and decentralised country like Indonesia affect local government performance? While a large literature on the topic already exists for well democratised and developed country, the impacts of political competition in developing countries, especially Indonesia remains understudied. Using a novel dataset of local election results between 1999 and 2009, I find that stiffer political competition improves local government performances and economic outcomes.

Chapter 3 focuses on the role of Information and Communications Technology (ICT) in policymaking. This study examines the impacts of the mobile phone adoption on leaders’ decisionmaking. Using Indonesian Village census data, I find robust evidence that the introduction of mobile phone increases the probability of the village head to implement policies to improve infrastructure, to provide training and grants and to increase civic engagement activities among the villagers. This chapter suggests that villagers usage of the mobile phone and spillover effects affects village leaders’ policies.

Chapter 4 examines the role of the Islamic party on policy choice and economic performance. Using Indonesian mayoral election results and a regression discontinuity design (RDD), I show that districts where the Islamic party barely won the election tend to have lower local state capacity. I show that partisan alignment and the implementation of Islamic laws are the key drivers of these results. The mechanisms suggest that districts with Islamic mayors will receive lower central government transfers and generate less local tax revenues.