Is Central Government Intervention Bad for Local Outcomes? Mixed Messages from Indonesia

Abstract

Central government line agencies in Indonesia spend a significant amount of their budgets directly in the regions, much of it on functions that have already been decentralised to local governments. Such deconcentrated spending contravenes both international best practices and Indonesian decentralisation legislation. Empirical evidence on the question of actual impact of such spending in Indonesia is mixed. The share of central deconcentrated spending that is co-administered directly with local governments appears to have beneficial service delivery effects; but the portion organised through provinces – without significant input from districts – has a negative impact on service outcomes.