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Abstract
This paper examines dynamics in public good accessibility and cross-community inequality in Indonesia,
using village-level panel data from 2000 to 2006 from their decentralized public-good allocation system.
The introduction of decentralization makes public-good investment dependent on initial local income and
endowment, and makes it difficult to coordinate investment decisions across communities. Our analysis
also shows that possible strategic interactions among communities connected with transportation
infrastructure (externalities) implies spatial divergence. Empirical evidence on education and health
facilities, however, demonstrates that during the decentralized period, (1) accessibility to school has
improved and school investments were effectively coordinated over space; (2) hospital access has
improved only marginally; but (3) per-capita availability of schools and local medical clinics (puskesmas)
in the community shows convergence toward low-level equilibria. Despite the coordination in spatial
allocation even in the decentralization period (observed in intervillage accessibility), endogenous
population mobility and growth partially cancel the benefits of the coordinated efforts in public-good
allocation. This point requires further policy attention.