Assessing the Spatial Concentration of Indonesia's Manufacturing Sector: Evidence from Three Decades

38 Pages Posted: 11 Jan 2017

See all articles by Alexander D. Rothenberg

Alexander D. Rothenberg

Board of Governors of the Federal Reserve System

Samuel Bazzi

Boston University - Department of Economics

Shanthi Nataraj

RAND Corporation

A.V. Chari

University of Sussex - School of Business, Management and Economics

Date Written: December 2016

Abstract

Beyond the role of economic forces, many theories of economic geography emphasize the way politics can shape the spacial configuration of economic activity. We investigate the impact of changes in political regimes on industrial concentration using 30 years of data on Indonesian manufacturers. These data span both the reign of Suharto, one of the strongest central governments in Southeast Asia, and its collapse and the subsequent decentralization of power. Using the canonical measure of Ellison and Glaeser, we show that in the mid 1980s, Indonesia’s firms exhibited a similar degree of agglomeration as seen in the United States. Spatial concentration then declined until the 1998 Asian Financial Crisis, and has since begun to rise during the decentralization period. We also measure concentration using the continuous measure developed by Duranton and Overman (2005), and find that the agglomeration exhibited by Indonesian firms is also broadly similar to that documented by Duranton and Overman (2005) for the United Kingdom, although localization drops off more gradually in Indonesia than in the United Kingdom. Using this continuous measure of agglomeration, we identify 32 manufacturing clusters in Indonesia, and investigate the correlates of concentration. We find that the most robust drivers of agglomeration have been natural resources and supply chain linkages, especially with respect to explaining long-term changes in spatial concentration.

Suggested Citation

Rothenberg, Alexander D. and Bazzi, Samuel and Nataraj, Shanthi and Chari, Amalavoyal, Assessing the Spatial Concentration of Indonesia's Manufacturing Sector: Evidence from Three Decades (December 2016). RAND Working Paper Series WR- 1180. Available at SSRN: https://ssrn.com/abstract=2897162 or http://dx.doi.org/10.2139/ssrn.2897162

Alexander D. Rothenberg (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th and C Streets NW
Washington, DC 20551
United States

Samuel Bazzi

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

Shanthi Nataraj

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States
310-393-0411 (Phone)

HOME PAGE: http://www.rand.org/

Amalavoyal Chari

University of Sussex - School of Business, Management and Economics ( email )

Falmer, Brighton BN1 9SL
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
30
Abstract Views
269
PlumX Metrics