Regional public infrastructures and development in decentralized Indonesia

Abstract

Empirical evidence on how investment in public capital by different levels of government plays a role in influencing socioeconomic development within the context of decentralized developing countries has been relatively limited. Using a case study of Indonesia, this paper aims to analyse the relationships between regional public infrastructures developed by different levels of government using different sources of budget and regional socioeconomic development. To achieve this goal, this paper utilizes a longitudinal data at district/city level, covering over 513 districts and cities in the country, for the period of 2010–2017. Our results show that, compared to those developed by district/city governments, infrastructures developed by provincial governments using their infrastructure budgets or utilizing national government infrastructure budgets deconcentrated to them have been more effective in inducing regional socioeconomic development in their regions. This paper recommends that the Indonesian government enhance the roles of provincial governments in developing regional infrastructure and provide strong incentives to support districts and cities in planning and implementing infrastructure projects.