is accountable to a municipal legislature. The second is Valsecchi (2013), who estimates the impact on corruption of the switch from parliamentarism to presidentialism in Indonesia, and finds that the switch to direct elections increases the number of corruption crimes by about half the preelection average.<sup>6</sup> Indonesia’s dual political transition to democratization and greater devolution from the late 1990s (Hofman and Kaiser, 2004, 2006) provides a unique opportunity to empirically assess the impact of reforms in political institutions on local government behavior, in a fiscally decentralized setting. The reforms assigned several hundred local governments across Indonesia with wideranging responsibilities over basic service delivery for education, health, infrastructure and general public administration; and introduced changes, in a phased manner, in the way local executive leaders (i.e., district heads) were selected. Although fiscal decentralization was implemented in a “Big Bang” in 2001, local heads of districts were initially indirectly selected by the local legislatures. Starting in 2005, district heads were selected through direct elections among citizens – following a more “presidential” rather than “parliamentary” system. The unique feature of this reform, crucial to our identification strategy, was that the change in political selection occurred in a staggered manner, with the timing of the change depending on _when_ the term of the previous head had ended in a district, which appears to be exogenously determined. Given that the timing of the first ever direct election of the district head in each district was determined by whether the head selected by the previous system had served their full tenure, direct elections had been held in a little more than one-third of all (434 in 2005) districts in June 2005. The remaining districts continued to be under the existing regime until the tenure of each of their indirectly elected heads was over. By 2007, around 62 percent of districts had undergone direct elections.

Against this background, this paper contributes mainly in three ways. First, the paper provides some of the first robust causal evidence on the impacts on accountability and fiscal outcomes of the switch from parliamentarism to presidentialism in Indonesia. The paper also provides a more convincing strategy to identify empirically the effect of an electoral reform – taking advantage of the phased and exogenous timing of districts switching to direct elections to identify the causal effect of directly elected district heads on district-level human development outcomes, spending and revenue. This is possible due to the rare opportunity afforded by the implementation of electoral reform in Indonesia, which approximates a “natural experiment”. Reforms related to

> 6 Faguet (2004), also uses municipality-level panel data from Bolivia to find that the switch to decentralized governance in Bolivia improved policy responsiveness to citizen needs, based on an analysis of sector-specific spending trends.  But given that decentralization occurred countrywide, Faguet’s analysis is limited to “before and after” comparisons without considering explicitly the role of political institutions.

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