Impact of fiscal decentralization and ethnic diversity on health outcome: an empirical evidence from Indonesia

The objective of this paper is to identify a causality between decentralization and health outcomes in Indonesia. In doing so, this paper employs Indonesian provincial-level data from 2001 to 2018 and applies a GMM HAC model to deal with potential endogeneity within the estimation. The result concludes that fiscal decentralization is associated with advancing regional health outcomes. The local government initiated the customized local health programme authorized by decentralization law can improve regional health outcomes. The result also suggests that ethnic diversity discourages regional health outcomes. Lower trust and lower society's participation rate in a more ethnically diverse region may reduce health outcomes in a more diverse society.