Fiscal decentralization, political participation and democratic consolidation

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Description

This study explores the relationship between fiscal decentralization, political participation and democratic consolidation. We develop a theoretical model based on the standard theory of rational voting. We further conduct empirical analysis using Indonesian district data. The case of Indonesia is of particular interest because the decentralization initiatives, which were adopted in 1999 and considered as the the most radical decentralization ever implemented in the world, were motivated mainly by the need to encourage citizen participation and strengthen the newly born democracy. Thus, it helps us to understand whether or not decentralizing fiscal power to lower level of governments encourages political participation and gradually consolidates a young and ethnically diverse democracy.