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This book analyzes the impact of decentralization on service delivery using Indonesia as a case study. Indonesia, one of the largest economies and most populated countries in the world, has been decentralized fiscally, administratively, and politically since 2001. Applying a unique approach, this book assesses the impact of the decentralization reforms and their impact on the quality of local governance and local public service delivery at different stages of the service delivery process. It is the first single-country study on the impact of decentralization on service delivery that analyses the input, output, and process of decentralization in more than one decentralized sectors concurrently. The analysis is based on systematic empirical evidence using a panel dataset covering more than ten years and more than 400 local governments. Indonesia's large size, socio-economic variation at the local level, and geopolitical importance as the biggest country in Southeast Asia along with its comprehensive decentralization reform will make lessons learnt from this study relevant for the international community.

Abstract: This book analyzes the impact of decentralization on service delivery using Indonesia as a case study. Indonesia, one of the largest economies and most populated countries in the world, has been decentralized fiscally, administratively, and politically since 2001. Applying a unique approach, this book assesses the impact of the decentralization reforms and their impact on the quality of local governance and local public service delivery at different stages of the service delivery process. It is the first single-country study on the impact of decentralization on service delivery that analyses the input, output, and process of decentralization in more than one decentralized sectors concurrently. The analysis is based on systematic empirical evidence using a panel dataset covering more than ten years and more than 400 local governments. Indonesia's large size, socio-economic variation at the local level, and geopolitical importance as the biggest country in Southeast Asia along with its comprehensive decentralization reform will make lessons learnt from this study relevant for the international community

We analyze the allocation of discretionary grants from the central government to local governments in Indonesia. Using OLS and Fixed Effects models on an unbalanced panel data set for more than 400 Indonesian districts covering the period 2005-2013, we investigate whether the allocation of the grants is determined by the need of a district, by political alignment of the central government with the local district heads, or by reelection motives of the incumbent president. We find that grant allocations are not determined by need characteristics and that political considerations matter significantly. Districts with low support for the president received significantly more than the core supporting districts, especially in the year of national elections. This effect is limited to the first term of the president. In the second term, after which reelection is impossible, political considerations were largely absent. This pattern is consistent with the view that the incumbent president considers discretionary grants as an instrument to increase reelection probabilities. Unlike the evidence for most countries, we find no effect for political party alignment with local district heads. Our results are robust to the inclusion of a number of other variables capturing competing motives.