Decentralization and Citizen Perception of Prosperity in Indonesia

Abstract

Abstract This article contributes to research on the impact of decentralization reforms on local and regional prosperity. We contend that implementing decentralization reform may encourage citizens to participate in policymaking. To test the idea, this study examines the relationship between fiscal decentralization, administrative autonomy, direct local elections, and citizen prosperity using the Indonesia Family Live Survey (IFLS) 2007. IFLS is a longitudinal survey that uses face-to-face interviews with adult Indonesians (N individuals = 29,000, N districts = 262). Using ordered logistic regression, we find that fiscal and administrative decentralization increases the probability that citizens feel prosperous, while direct local elections do not appear to have this effect. This relationship is stronger when the decentralization reform is conducted in a less-corrupt institutional environment. The findings suggest that decentralization in the weak political system may improve local prosperity through the improved capacity of Indonesian districts to deliver public services rather than through the opportunities for citizens to participate in local elections.

Keywords

• administrative decentralization
• citizen perceptions of prosperity
• fiscal decentralization
• local elections