Decentralisation and Human Development in Indonesia: The Importance of Local Government Capacity in Delivering Development Outputs and Outcomes

The debate about the effect of decentralisation on the improvement of human development still exists, which led scholars to investigate the role of government capacity. This study aims to examine the impact of local government capacity on human development in Indonesia during the decentralisation reform over the period 1996-2020. Multiple regression analysis illustrates the role of local government capacity during decentralization. In this study, several human development indicators has failed to improve during the decentralization process. The failure of human development was strongly related to local government capacity to produce education, health, and economic outputs and outcomes. Our study shows how government can stimulate human development during the process of decentralisation by strengthening local government capacity.