Administrative Overspending in Indonesian Districts: The Role of Local Politics

We analyze the determinants of the excessive administrative spending of local governments in Indonesia. In an unbalanced panel data set of 399 districts for 2001-09, we show that the proliferation of districts has not led to increased administrative spending; instead a lack of political accountability is responsible for this excess. The degree of political competition influences the level of administrative spending significantly; newly introduced direct elections of district heads, however, did not curtail the waste.