We find significant political budget cycles (PBCs) for Indonesian districts only for direct, not for indirect, elections. PBCs are significantly stronger if the incumbent runs for reelection. They are well identified due to the exogenously different timing of elections.

We analyze the determinants of the excessive administrative spending of local governments in Indonesia. In an unbalanced panel data set of 399 districts for 2001–09, we show that the proliferation of districts has not led to increased administrative spending; instead a lack of political...