Aid, Social Capital and Village Public Goods: After the Tsunami.

Tiago Freire • Vernon Henderson • Ari Kuncoro
Working Paper LPEM FEB UI • June 2010 Indonesia

Abstract

Using survey data on fishermen and fishing villages in Aceh, Indonesia from 2005 and 2007, this paper examines the effect of the December 2004 tsunami and resulting massive aid effort on local public good provision, in particular on public labor inputs, but also public capital choices. Also analyzed are the roles of and changes in local social and political institutions and participation in political and social activities. Such an examination informs not only our understanding of the impacts of aid on villages, but also our understanding of how villages allocate resources to public goods. For public labor inputs, volunteerism is lower in villages with more aid projects, but that is offset if the dominant donor mitigates agency problems by doing its own implementation. Volunteerism is lower in villages with more 'democratic' activity such as elections, although that effect is mitigated in villages with higher levels of social capital pre-tsunami. Evidence suggests volunteerism is lower not because of changes in types of leaders with village elections per se, but rather due to heightened internal divisions associated with elections. Correspondingly for public capital, villages with more democratic activity combined with more aid projects tend to emphasize garnering private aid (e.g., houses) at the expense of public aid (e.g., public buildings).

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LPEM FEB UI

Institute for Economic and Social Research – Faculty of Economics and Business, University of Ind... see more