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Don't Put All Eggs in One Basket: Subnational Resource Curse and The Need for Economic Diversification in Indonesia 2003-2016

Author

Listed:
  • Berly Martawardaya

    (Institute for Development of Economics and Finance (INDEF))

  • Muhammad Fadli Hanafi

    (Faculty of Administrative Science, University of Indonesia)

Abstract

Resource curse is a concept that has been studied numerously at national level but still very few at sub-national level. We conducted a study on Indonesia that has provinces with varying level of natural resources endowment. We created four quadrants to categorize Indonesia provinces and analyzed the relation between economic diversification and development outcomes. We calculated diversification using Herfindahl Hirsch Index (HHI) for period of 2003 to 2016 and differentiate between provinces with dependency on oil and gas as well as wider category of mining sector. The former experienced higher inequality by 0.103%, and higher poverty by 0.03% while the latter category is correlated with slower growth by 0.511%. but experienced higher human deployment index (HDI) abut lower Gini Ratio) by respectively 0.033% and 0.038%. Nevertheless, dependency on mining sector is correlated with lower poverty of 0.142%.The study concluded with recommendations to diversify the economy and optimized the impact of provincial budget.

Suggested Citation

  • Berly Martawardaya & Muhammad Fadli Hanafi, . "Don't Put All Eggs in One Basket: Subnational Resource Curse and The Need for Economic Diversification in Indonesia 2003-2016," INDEF Working Papers, Institute for Development of Economics and Finance (INDEF), number 012020, January-J.
    • Handle: RePEc:ahp:wpaper:012020
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    References listed on IDEAS

    as
    1. Eric M. Engen & Jonathan Skinner, 1992. "Fiscal Policy and Economic Growth," NBER Working Papers 4223, National Bureau of Economic Research, Inc.
    2. Coxhead, Ian & Li, Muqun, 2008. "Prospects for Skills-Based Export Growth in a Labour-Abundant, Resource-Rich Economy: Indonesia in Comparative Perspective," Staff Paper Series 524, University of Wisconsin, Agricultural and Applied Economics.
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    More about this item

    Keywords

    subnational resource curse; diversification index; Indonesia;
    All these keywords.

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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