Description
Title: Impact of Village Fund on Rural Economic Growth in Indonesia: A Growing Light in the Lag Region
Abstract: An important goal of governments everywhere has been and will continue to be closing the development gap. The Indonesian government has been implementing the illage fund (VF) transfer since 2015 to improve the rural economy, particularly in remote areas. Depending on where the village is located, the effect of the VF on village development may be very different. This study investigates the causal relationships between VF transfer and the rural economic development of underdeveloped Indonesian villages. We discovered a significant improvement in rural economic growth in underdeveloped villages after VF transfer by using a nighttime light dataset at the village level as a proxy for rural economic growth and a regression discontinuity design in time. Our research demonstrates that East Indonesia’s underdeveloped villages are expanding more quickly than those in West and Central Indonesia. In comparison to growth prior to the implementation of VF, the average increase in nightlight is approximately 156% in East Indonesia, 141% in Central Indonesia, and 98% in West Indonesia. Therefore, there is a compelling case for reviewing the VF’s current formula in order to close Indonesia’s rural development gap.
Keywords: rural development; sustainable development; impact evaluation; intergovernmental transfer; remote sensing application; regression discontinuity design
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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