Work in Progress
Authoritarian Legacies and Structural Transformation: Evidence from Indonesia’s Democratic Transition (With Sunghun )
Even with the transition from authoritarianism to democracy, the influence of authoritarian legacies often persists in national economies. This study explores how remnants of authoritarianism after democratization affect structural transformation. Leveraging the episode of Indonesia's democratic transition in 1998 and the continuation of district-level mayors from the former authoritarian regime, we investigate the impact of authoritarian political power persistence on economic structural transformation at the district level. Employing two datasets, namely mayor's dataset and firm level dataset, our findings show that districts more exposed to the old regime's influence attract higher firm-level investment inflows, particularly foreign direct investment (FDI). Additionally, increased manufacturing-oriented investments foster a shift in labor from agriculture to manufacturing. In such districts, voter support for authoritarian-linked parties remains strong post-democratization, shedding light on why successor parties of authoritarian regimes retain significant backing after democratic transitions observed in the new democracies of the 1990s.
Working title: Tax decentralization and accountability: a natural experiment from Indonesia (With Sandy J. Maulana)
Theories on fiscal decentralization suggest that local governments, which finance their expenditures largely from their locally raised tax revenues, are more accountable to their citizens. Examining this theory has been empirically challenging due to the nature of large-scale reforms and the absence of a counterfactual situation, while cross-country analysis proves to be of little relevance. In this study, we test the theory by exploiting the staggered implementation of property tax devolution in Indonesia, which enables us to causally estimate the effect of different decentralization policies on local government accountability.
From 2009 to 2014, the Government of Indonesia enacted a new law to delegate property tax administration and collection to local governments, particularly tax revenue collected from urban and rural land and buildings, which was previously managed by the Central Government. We collected novel data based on more than 500 local government regulations regarding the starting dates of property tax collection, synthesized it with local budget data, and applied a difference-in-differences approach with multiple time periods (Callaway and Sant’Anna, 2021).
Our results show that tax decentralization decreases personnel spending and discretionary social transfers but increases capital spending, implying mixed results on accountability. Additionally, the results are robust to different fixed effects specifications and to the anticipation of treatment. Paper relates to: Political accountability in autocracies and democracies.
Working title: Term limits, intergovernmental transfers and election outcomes: Evidence from Indonesia
In a multi-level government, reputation of the central government might be built upon the performance of local governments. For example, the incumbent central government who is seeking for re-election might allocate more transfers to aligned local governments. This paper argues that, in addition to political alignment, term limits explain the allocation of transfers and, thus, central government election results. In particular, due to career concerns, local governments who are seeking re-election are expected to show better performances than do those who are term-limited. Accordingly, central government allocates more transfer to these local governments and, thus, is expected to win more in these local governments. This paper proposes a simple model and conducts empirical analyses using data from the 2019 presidential election across districts in Indonesia.
Working title: The Persistence of Non-Democratic Legacy: Evidence from Indonesia
Literature documents that democratizing countries perform worse when compared to more established democracies. While the transition from nondemocracy to democracy has changed the formal political institutions dramatically, some of the non-democratic institutions might persist. I look at Indonesia’s transition to democracy in 1998 to study the persistence of authoritarian legacy at the local level. Benefiting from the exogenous variation of the number of years that last mayor from the authoritarian regime stayed in the office post-transition and Employing data from the 2014 presidential election, the results shows that districts where the authoritarian-appointed mayor stayed longer exhibit a higher electoral support to a presidential candidate with strong authoritarian tendencies