Spatial Decentralization and Program Evaluation: Theory and an Example from Indonesia

31 Pages Posted: 4 Oct 2010

See all articles by Mark M. Pitt

Mark M. Pitt

Brown University

Nidhiya Menon

Brandeis University - International Business School

Abstract

This paper proposes a novel instrumental variable method for program evaluation that only requires a single cross-section of data on the spatial intensity of programs and outcomes. The instruments are derived from a simple theoretical model of government decision-making in which governments are responsive to the attributes of places and their populations, rather than to the attributes of individuals, in making allocation decisions across space, and have a social welfare function that is spatially weakly separable, that is, that the budgeting process is multi-stage with respect to administrative districts and sub-districts. The spatial instrumental variables model is then estimated and tested by GMM with a single cross-section of Indonesian census data. The results offer support to the identification strategy proposed.

Keywords: spatial decentralization, program evaluation, instrumental variables, Indonesia

JEL Classification: C21, H44, O12, C50

Suggested Citation

Pitt, Mark M. and Menon, Nidhiya, Spatial Decentralization and Program Evaluation: Theory and an Example from Indonesia. IZA Discussion Paper No. 5208. Available at SSRN: https://ssrn.com/abstract=1686499

Mark M. Pitt (Contact Author)

Brown University ( email )

Box B
Providence, RI 02912
United States
401-863-2970 (Phone)
401-863-1970 (Fax)

Nidhiya Menon

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States
781-736-2230 (Phone)
781-736-2269 (Fax)

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