The Economic Cost of Violent Conflict: The Case of Maluku Province in Indonesia

Abstract

Against the background of the socio-economic and political crises of 1998–2000 in Indonesia, one of its provinces, Maluku, endured its own internal conflicts between 1999 and 2004. The coincidence of these national and regional crises—the tumult affecting Indonesia as a whole and the conflict restricted to Maluku—make the impact of local conflict on Maluku’s economy hard to identify empirically. To solve this problem, we use a synthetic control method (SCM) to construct a synthetic control unit for Maluku based on other Indonesian provinces. Our findings support the view that the violence in Maluku between 1999 and 2004 shifted the regional economy onto a lower growth path.

Berlatarbelakang krisis sosial ekonomi dan politik 1998–2000 di Indonesia, salah satu provinsi, yakni Maluku, mengalami konflik internalnya sendiri antara 1999 dan 2004. Berdekatannya kedua krisis nasional dan regional ini, baik keributan yang mempengaruhi keseluruhan Indonesia maupun konflik yang terbatas di Maluku, membuat sulitnya mengidentifikasi secara empiris dampak konflik lokal pada perekonomian Maluku. Untuk mengatasi masalah ini, penulis menggunakan metode kendali sintesis (synthetic control method, SCM) untuk membangun unit kendali sintesis bagi Maluku, berdasarkan provinsi-provinsi lain di Indonesia. Temuan kami mendukung pandangan bahwa kekerasan di Maluku antara 1999 dan 2004 telah menggeser perekonomian regional ke alur pertumbuhan yang lebih rendah.

Keywords:

• synthetic control method
• decentralisation
• conflict

JEL classification:

• R11
• R58
• Q34