TY - JOUR
T1 - Industrial centralization in Indonesia
AU - Henderson, J. Vernon
AU - Kuncoro, Ari
N1 - Funding Information:
J. Vernon Henderson is with the Department of Economics at Brown University and at the National Bureau of Economic Research, and Ari Kuncoro is with the Department of Economics at the University of Indonesia. The authors acknowledge research support from the National Science Foundation and from the World Bank. They also acknowledge helpful discussions with Berry Cole, Jim Hanson, John Harris, and Dick Pacton, and helpful comments from Robert Moffitt and Mark Pitt on estimation issues, and from the anonymous referees. Mark Pitt kindly assisted in data provision.
PY - 1996/9
Y1 - 1996/9
N2 - In certain situations, economic liberalization policies can increase the degree of spatial centralization of resources and spatial concentration of manufacturing in large metropolitan areas. In addition, historical patterns of location make it difficult to alter the degree of centralization. This article explores these issues by specifying and estimating a nested logit model of industrial location of manufacturing activity in Java, focusing on the unincorporated sector. The results indicate that plants strongly prefer locations with mature plants in related industries, which offer a built-up stock of local knowledge. In addition, the 1983 liberalization in Indonesia was associated with increased centralization of the unincorporated sector. Although the liberalization gave unincorporated firms better access to government and other centralized services, firms needed to centralize to take advantage of these opportunities because the bureaucratic process is centralized and communications are poor. The relative increased growth of the corporate sector following liberalization may also have helped to further draw unincorporated plants into centralized locations.
AB - In certain situations, economic liberalization policies can increase the degree of spatial centralization of resources and spatial concentration of manufacturing in large metropolitan areas. In addition, historical patterns of location make it difficult to alter the degree of centralization. This article explores these issues by specifying and estimating a nested logit model of industrial location of manufacturing activity in Java, focusing on the unincorporated sector. The results indicate that plants strongly prefer locations with mature plants in related industries, which offer a built-up stock of local knowledge. In addition, the 1983 liberalization in Indonesia was associated with increased centralization of the unincorporated sector. Although the liberalization gave unincorporated firms better access to government and other centralized services, firms needed to centralize to take advantage of these opportunities because the bureaucratic process is centralized and communications are poor. The relative increased growth of the corporate sector following liberalization may also have helped to further draw unincorporated plants into centralized locations.
UR - http://www.scopus.com/inward/record.url?scp=0030301521&partnerID=8YFLogxK
U2 - 10.1093/wber/10.3.513
DO - 10.1093/wber/10.3.513
M3 - Article
AN - SCOPUS:0030301521
SN - 0258-6770
VL - 10
SP - 513
EP - 540
JO - World Bank Economic Review
JF - World Bank Economic Review
IS - 3
ER -