Political Budget Cycles in Indonesia at the District Level

The project investigates political budget cycles at the local level in Indonesia, a newly democratized and decentralized state, which devolved the spending of approximately 40% of the consolidated budget to the local level in 2001 and stipulated that district heads had to be elected by the local parliament and, starting in 2005, directly by the local population. Since district elections take place at exogenously determined different points in time, a political budget cycles effect is clearly identified. We disaggregate the administrative expenditure into discretionary and non-discretionary components. Our hypotheses is that incumbents raise their discretionary funds in election years to donate to religious and/or social institutions or activities to increase their popularity. In some cases, they channel these funds to finance their campaign activities. We find that this expenditure category displays a strongly cyclical behavior—only in direct elections and especially if the incumbent is running for reelection. Thus political budget cycles exist in Indonesia at the local level, but they are conditional on the institutional arrangement (direct elections) and the budget category (discretionary spending).

contact person: Prof. Dr. Günther Schulze
Phone: 0761 203-2342
Email: guenther.schulze@vwl.uni-freiburg.de

Start of project: 01.01.2012
End of project: 15.04.2013

Albert-Ludwigs-University Freiburg
Schulze G
Abteilung für Internationale Wirtschaftspolitik
am Institut für Allgemeine Wirtschaftsforschung
Platz der Alten Synagoge
79085 Freiburg i. Br.
Germany

Phone: 0761-203 2342
Fax: 0761-203 2414
Email: judith.mueller@vwl.uni-freiburg.de
http://www.vwl.uni-freiburg.de/iwipol/sopo.htm
Actual Research Report

• Kis-Katos K
• Schulze G
• Sjahrir Putra B

political budget cycles, Indonesia, local governments, decentralization, local elections

• Sjahrir, Bambang S., Kis-Katos, Krisztina, Schulze, Günther G.: Political Budget Cycles in Indonesia at the District Level Econ Lett, 2013; 120 (2): 342-345. : http://dx.doi.org/ 10.1016/j.econlet.2013.05.007