Determinant factors of regional disparities using new economic geography framework in Indonesia, post decentralization

Abstract

The policy of implementing decentralization of authority has changed the constellation of regions in Indonesia. By making use of a new economic geographic framework, determinants of inter-provincial disparities in Indonesia are examined, and the results show that a market of foreign access has a substantial effect on per capita GRP between provinces. Those empirical results support the prediction of a new theory of economic geography: access to market causes differences of GRP per capita and further increases inequalities between provinces. This study also finds that urbanization increases inter-provincial per capita GRP disparities