This open access book thoroughly investigates the domain of policy design tailored specifically for micro, small, and medium enterprises (MSMEs) with a central emphasis on harmonizing these policies with the preexisting social capital inherent to these enterprises, consistent with the mandate of Bank Indonesia to guard price stability and to promote financial stability, inclusive, and sustainable growth. The study, grounded in the context of Indonesia, underscores the paramount importance of a systematic approach, necessitating social planners and stakeholders to engage in a preliminary phase of active listening, empathetic understanding, and comprehensive knowledge of the diverse mental frameworks prevalent among MSMEs across the nation before embarking on the formulation of bespoke interventions. Readers of this scholarly work can anticipate gaining insightful perspectives into the nuanced policy preferences of both MSMEs and government officials. The methodologies employed, including the Analytic Hierarchy Process and Analytic Network Process, are not only presented but also subjected to rigorous feasibility assessments using the Mechanism Design Theory. Furthermore, the book delves into the intricate challenges faced by MSMEs, including addressing the financing gap and adapting to the digitalization landscape that considers the prevailing social capital, both of which significantly influence their overall productivity. Ultimately, the study underscores the pivotal role played by networks, rather than mere size and the usual suspects (financing, technology, and management), as the linchpin of social capital that profoundly shapes the performance of MSMEs within a specific socio-economic context.
This open access book analyzes the dualism and inequality insofar as how it is manifested in interregional disparity and small enterprises. Using the case of Indonesia, the author considers how the general direction of policy should be to mitigate the effects of agglomeration forces leading towards concentration, and exploit the same forces by encouraging small businesses to operate in a cluster for collective action. The book addresses these issues by focusing on the role of interactions between policies and institutions, of which social capital is an important part. This is an open access book.
"Regional Economics: Fundamental Concepts, Policies, and Institutions is a unique and unconventional economics textbook which emphasizes the role of 'space' in economics and highlights the importance of non-economic factors particularly the role of institutions in regional development. It also presents the approach on how to evaluate regional development performance based on economic, social, and environmental considerations, which is the organizing principle for meeting people-oriented development and sustainable development goals. Other essential concepts such as 'regional science' and 'spatial economics' are also explored in this book. Why activities tend to be spatially concentrated and can get more intensified despite efforts to disperse them toward other regions? Why infrastructure development intended to increase activities and improve the population's welfare can produce the opposite outcome of greater interregional inequality? What is the role of regional and national policies in affecting growth incentives, and how non-economic factors such as institutions and the quality of local leaders can make a difference in welfare achievement? Addressing these questions allows readers to better understand the various phenomena in the actual development process."
To the extent that financial contagion from the United States and the euro area crisis has occurred in Asia, this paper focuses on the importance of strengthening the regional financial safety nets. By conjecturing that efforts to prevent and manage a crisis are the essence of providing such safety nets, I argue that efforts made by ASEAN+3 officials, especially in the provision of liquidity support during a crisis, are far from adequate. The collapse of Lehman Brothers in the autumn of 2008 could be a game-changer in the global financial market, making the probability of financial contagion higher than ever before. Even with improved financial conditions and stronger regulations in ASEAN+3 member countries, contagion can and will strike. Making the Chiang Mai Initiative Multilateralization more effective is therefore urgent and critical.
Decentralization policy by itself is not a panacea for problems of accountability. A model is developed to exemplify a condition whereby given widespread 'capture' in local elections, voices or people's participation stands out as the most important factor that determines whether the decentralization system produces positive or negative local capture. The size of local budget and the initial welfare condition matter as well. The latter can also explicate the persistent gap between poor and rich regions observed in many countries. The welfare effect of the policy depends on the behavior and quality of local leader that govern the interplay of the above factors. The model can thus produce multiple equilibria. To the extent that the quality and behavior of local leader play a critical role, a three-player coordination game is constructed to reflect the hypothesis postulated by the theory of endogenous institution.
Applying the Institutional Model of Decentralization, the paper argues that the presumption that local democracy will impose accountability pressure on elected officials does not always hold. Even in a democratic system like in Indonesia, decentralization policy is welfare-enhancing only for the developed regions, not for all, exacerbating interregional welfare disparity. This "captured democracy" is largely due to the presence of "negative local capture". Where welfare has not improved, limited participation, low initial welfare combined with poor quality of local leaders are found to be the most critical determinants.
AbstractExploring the hypothesis that socio-economic discrimination contributes to conflict occurrence, we show that the experience of a large country that have gone through a big-bang shift from centralized to decentralized system and introduced direct local elections, confirms the link. Using the case of Indonesia, and by controlling for poverty, demand-induced resource scarcity, and institutional variables, it is revealed that income polarization and inequality at the provincial level explain the occurrence of violent conflict (causing at least 1 death), be it for total or for different types. The results are robust to a series of model specifications. For understanding its impact on conflict, polarization is found more important than income inequality as a measure of socio-economic discrimination.