One Size Does Not Fit All: The Heterogenous Impact of Democracy on Economic Growth in Indonesia

Hidsal Jamil; Candra Fajri Ananda; Ferry Prasetyia

doi:10.29313/mimbar.v0i0.10114

One Size Does Not Fit All: The Heterogenous Impact of Democracy on Economic Growth in Indonesia

Hidsal Jamil, Candra Fajri Ananda, Ferry Prasetyia

Abstract

Indonesia's democratic level has grown during the last decade. Unfortunately, economic growth is on the decline at the same time. Based on this phenomenon, this study investigates whether democracy has a causal impact on economic growth. The panel data used in this study spans 33 Indonesian provinces from 2009 to 2020. The fixed-effect analytical model was employed to capture the effects of changes in provincial characteristics. This study provides empirical evidence that democracy supports economic growth, even though human capital, infrastructure capital, and government and trade policies are considered in the analytical model. By splitting the sample, this study finds that democracy is a predictor of economic growth in provinces in Java and provinces in the Western Part of Indonesia. The findings in this study have implications for policymakers and researchers; ”One Size Does Not Fit All” in democracy context. The democracy-based economic growth strategy in Java and Western Indonesia needs to be maintained. Strengthening political rights and improving the quality of democratic institutions, on the other hand, are required to ensure that the economic benefits of democracy can be noticed Outside of Java and Eastern Indonesia.

Keywords

Democracy; Economic Growth

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References

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DOI: https://doi.org/10.29313/mimbar.v0i0.10114

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