Archive for March, 2012

Historical Institutionalism

The institutional approach offers a comprehensive analytical tool to overview institutional influence to variations in regional economic performance. The literature shows that neoclassical quantitative research is inadequate to explained economic development as it lacks to analyze institutions as the rule of economic agent behaviour and failure to recognize the role of historical embeddedness (North, 1994). The neoclassical economy focus on operation of the market and treat it as a single and independent subject leads to its lack of understanding on how and what really driven the economic development.

Specifically, this research applies historical institutionalism approach, refers to the study of how social and political institution structure interactions influence distinctive national trajectories (Hall and Taylor, 1996). The distinctive trajectories lies in the political theories, which institutions of polity and economic structure conflicts that causes unevenness, and in the structuralism that saw polities and economic as the principal factor of collective action and generating different outcomes. This study employs historical institutionalism to overview ways of variation in preexisting institutions, at local and national levels, that determine the degree of local capacity to establish institutions and policies necessary in economic development. This research studies the two characters of historical institutional approach, which are the critical juncture and feedback effects (Ikenberry, 1994), in understanding the persistent of Indonesian regional economic divergence.

Thesis: Institutional Chapter

This chapter argues that state restructuring in decentralization and AFTA has not impact regional economic growth during the transition period in the last decade. The persistent regional disparities are viewed as the long-term effect from the centralized development from three decade earlier.

Research gaps and questions

To understand the impact of state restructuring to regional economic growth, this chapter provides analysis with institutional approach. The approach has been widely applied to studies in economics, urban planning and governance, and local polities dynamics. However, despite this broad application, institutional analysis has been absence in explaining institutional changes that occurs in state restructuring and its impact to regional development.

The above research gaps leads to the following research questions:

  1. What are the institutional changes that occur in state restructuring of decentralization and trade liberalization?
  2. To what extend does institutional change analysis explains regional economic performance?

March 2012
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