Does local democratization improve societal outcomes? Effects of mayoral direct elections in Indonesia

Local democratization aims to improve the decentralized capacity of governance regimes to generate meaningful municipal spending geared towards realizing societal outcomes. In the late 1990s, following the Asian financial crisis, Indonesia initiated a significant institutional transition from centralistic and authoritarian rule towards decentralized and more democratic governance through the introduction of direct mayoral elections. Extant research analyzed the effects of the introduction of these elections on local public spending and local societal outcomes separately. This paper offers an integrated analysis of the impact of the introduction of direct mayoral elections on both local public spending and local societal outcomes in 456 Indonesian municipalities between 2002 and 2012. Analyses of growth models, using panel data on three domains (education, health, and infrastructure) provided by Indonesian Ministry of Finance, Indonesian Ministry of Home Affairs, and Statistics Indonesia, show that the introduction of direct mayoral elections in Indonesia resulted in an increased growth in educational expenditures. It also improved outcomes in health and infrastructure domains. However, the introduction of direct mayoral elections reversed a positive association between public spending and the attainment of societal outcomes or worsened a negative association between them. These results would support a view on local democratization in Indonesia asserting that the introduction of direct mayoral elections stimulated local clientelist practices rather than local accountability and policy responsiveness.