When Regional Policies Fail: An Evaluation of Indonesia’s Integrated Economic Development Zones

Wednesday, 1 March, 2017
Abstract: 
We study the impact of Indonesia’s KAPET programme, which provided incentives to firms to locate in specific districts. We find that the programme reduced the tax burdens faced by firms, but these tax reductions did not increase the entry of large, productive firms or generate substantial increases in productivity or value added. Consequently, we do not see sustained increased migration rates or population growth in response to the programme, and overall, KAPET districts did not grow faster after its introduction.