Village Funds and Infrastructure Development: Evidence from Indonesia

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Akhmad Solikin, Maman Suhendra, Acwin Hendra Saputra, I Gede Agus Ariutama, Bondi Arifin, Eko Wicaksono, Irwanda Wisnu Wardhana, Rita Helbra Tenrini, Hadi Setiawan, Sofia Arie Damayanty, Praptono Djunedi, Arif Budi Rahman, Rudi Handoko


Infrastructure condition in Indonesia was skewed toward western part of Indonesia and urban areas. Since 2015, Indonesian government has implemented village fund program by allocating a large amount of money to villages most of which was utilized to build small scale infrastructures. This paper aims at inquiring impact of the village fund program to the quality of infrastructure provision and services. This study uses primary data from surveys in more than two thousands villages and kelurahan. By using difference-in-difference regression and benefit incidence analysis, this study indicates that the quality of transportation, electricity/lighting, health and agricultural infrastructure in villages improve substantially after four-year implementation of village fund program. Therefore, quality and service provision gaps of basic infrastructure between rural and urban have been decreasing. In addition, lower income groups in rural areas benefit more from infrastructure development, making the infrastructure development pro poor. From the findings, the Indonesian government should continue the village fund program, yet divert more resources for community empowerment to gain full benefit of previous basic infrastructure provision. However, the results should be interpreted with caution, given the limitation of study design which employed nonrandom sampling.

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