local institutions.<sup>13</sup> The data set contains information for the period 1999 to 2007 on how the current district head was selected (e.g. by pre-1999 DPRDs, indirect elections by post-1999 DPRDs, direct elections, or whether (s)he is a caretaker head appointed by the central government until the next elections), the name of the elected district head, whether (s)he was preceded by a caretaker district head, whether the incumbent governor won or ran in the elections, the reason for the incumbent governor not contending, the share of votes won, the number of candidates , the political party, the date the term began and ends and some key personal characteristics such as gender, and whether (s)he is in the military.

The SIKD regional budget data from 2001 to 2006 was derived from MoF‘s Regional Financial Information System ( _Sistem Informasi Keuangan Daerah_ , SIKD).<sup>14</sup> The Fiscal Year within this time span runs from January to December. The introduction of a ―new‖ budget format according to MoHA Decree no. 29/2002 changed the budget structure since 2003, with the changes mostly affecting the classifications on the expenditure side.<sup>15</sup> To enable comparison over time, we converted the new dataset into the old format as per SIKD guidelines – by mapping the post-2003 expenditure data into the old categories of development and routine expenditures. To measure changes in real terms, we also deflated the fiscal data for 2001 to 2006 using 2000 as the base year.

The changes in fiscal variables over time and across treatment and control districts estimated in more detail by the regressions can be seen clearly from graphs showing trends for different groups. Figure 4 traces the averages of selected fiscal variables over time and separately for treatment and control groups. An implicit assumption behind the application of the DID estimator is that the time trend (or year effect) is identical between the treatment and control groups in the years prior to the elections. The graphs in figure 4 suggest that the assumption of common trends between the treatment and control groups prior to the elections (2001-2005) is justified, a fact that has also been confirmed by a variety of statistical tests. Average per capita total expenditure and

> 13 Special thanks go to Bambang Suharnoko (WB), Anstasia Soeryadinata and W. Paul Roland (NDI Indonesia), Natalia Warat, and Jeremy Gross (Asia Foundation).

> 14 SIKD is a facility provided by the Ministry of Finance to collect, validate, process, and analyze regional financial information. Regional governments have the legal obligation to report this data to the Ministry of Finance in a timely manner.

> 15 Before 2003, there were only two categories- revenues and expenditures with expenditure classified as either routine (recurrent) or development (investment). From 2003, the classification on the expenditure side changed from ―routine‖ and ―development‖ expenditures to ―public‖ and ―apparatus‖ expenditures. The other change introduced was the separation of ―financing‖ item from revenue and expenditure categories.  Approximately 60 percent of all regions used the new budget format for the 2003 realizations, while 40 percent continued to use the old format. By 2004, 90 percent of regions were using the new budget format.

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