Agglomeration, Transport, and Regional Development in Indonesia

Agglomeration, Transport, and Regional Development in Indonesia

How effective are public interventions in addressing significant regional disparities in formal manufacturing concentration in a developing economy? The authors examine the aggregate and sectoral geographic concentration of manufacturing industries for Indonesia, and estimate the impact of factors...

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Bibliographic Details
Main Authors: Deichmann, Uwe, Kaiser, Kai, Lall, Somik V., Shalizi, Zmarak
Format: Policy Research Working Paper
Language:English
Published: World Bank, Washington, DC 2012
Subjects:
ACCOUNTABILITY
ACCOUNTING
ALTERNATIVE POLICY OPTIONS
AUDITING
CITIES
CITY SIZE
CONSTRUCTION
COST OF LIVING
COST SAVINGS
DECENTRALIZATION
DECISION MAKING
ECONOMIC ACTIVITY
ELASTICITIES
EMPIRICAL STUDIES
EMPLOYMENT
ENDOGENEITY
ENVIRONMENTAL IMPACT
EQUILIBRIUM
EXTERNALITIES
FOOD PRODUCTS
FOREST COVER
FOREST RESOURCES
FORESTS
HIGH LEVELS
INSURANCE
INTERMEDIATE GOODS
LABOR COSTS
LAND COVER
LAND SUPPLY
LEVIES
LOCAL GOVERNMENT
LOCAL GOVERNMENT TAXATION
LOCAL GOVERNMENTS
LOGGING
MIGRATION
MUNICIPALITIES
NATURAL RESOURCE BASE
NATURAL RESOURCES
PERMITS
POLICY MAKERS
POPULATION DENSITIES
PRODUCERS
PRODUCTION PROCESS
PRODUCTION TECHNOLOGY
PRODUCTIVITY
PROFITABILITY
PUBLIC POLICY
QUALITY OF LIFE
RECYCLING
REVENUE SOURCES
SAVINGS
SPILLOVERS
TAXATION
TRANSACTION COSTS
TRANSPORT
UNCERTAINTY
URBAN AREAS
URBANIZATION
USER CHARGES
WAGE RATES
WAGES
Online Access:http://documents.worldbank.org/curated/en/2005/01/5589082/agglomeration-transport-regional-development-indonesia
http://hdl.handle.net/10986/8900
Description
Summary:How effective are public interventions in addressing significant regional disparities in formal manufacturing concentration in a developing economy? The authors examine the aggregate and sectoral geographic concentration of manufacturing industries for Indonesia, and estimate the impact of factors influencing location choice at the firm level. They distinguish between natural advantage, including infrastructure endowments, wage rates, and natural resource endowments, and production externalities, arising from the co-location of firms in the same or complementary industries. The methodology pays special attention to empirically distinguishing the impact of measured production externalities from unobserved local characteristics. Depending on the sector, the authors find that a mix of both forms of regional advantage explains the geographic distribution of firms. Based on the estimated location choice model, they illustrate the potential impacts of policy interventions on manufacturing distribution by simulating the effectiveness of transport improvements on relocation of firms. Their findings suggest that improvements in transport infrastructure may only have limited effects in attracting industry to secondary industrial centers outside of Java, especially in sectors already established in leading regions. The findings underscore the challenges for addressing the industrial fortunes of lagging regions, either through local decentralized policy interventions or national policies focused on infrastructure development.

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