Does local government proliferation improve public service delivery? Evidence from Indonesia

Local government proliferation—the creation of new local governments via the splitting of administrative jurisdictions into smaller units—is a ubiquitous phenomenon in developing countries. Supporters of proliferation argue that it brings government closer to citizens and thereby helps to better match public service supply with demand. In Indonesia, the number of local governments has increased by about 80% since just prior to the initiation of the government’s decentralization program in 2001 until present. This investigation exploits the plausibly exogenous timing of local government splitting to identify the causal effects of proliferation on education and infrastructure service access in Indonesia. The examination finds that the establishment of new local governments has no impact on school enrollments but that it negatively affects water and sanitation access. The study offers some preliminary evidence to imply that the poor infrastructure service performance of newly created local governments is driven by the relatively corruptible nature of the sector and the comparatively more fragile governance environments that exist in new local jurisdictions.