In this FKP / Global Seminar, Aichiro Prabowo, Thomas Pepinsky and Alexander Rothenberg will discuss their recent research on Nusantara's public funding, public support and economic impacts.
Event details
Date: Wednesday, 3 June 2026
Time: 11.00 AM-12.30 PM AEST || 08.00-09.30 WIB (GMT+7)
Join online via Zoom: bit.ly/gs_indonesia
Join online via Youtube: bit.ly/ip-live
Abstract
Indonesia’s new capital city: public funding and public support
Aichiro Suryo Prabowo (Monash University, Indonesia) and Thomas B. Pepinsky (Cornell University)
Indonesia’s new planned capital city of Nusantara is the most significant public works project in modern Indonesian history. We study the economics and politics of Nusantara from the perspectives of public budgeting and political economy. Combining data from official planning documents and media accounts with a large body of original public opinion data, we find that (1) the only feasible source of funding that can be mobilized for Nusantara is the state budget, and (2) while Indonesians across age cohorts support the idea of relocating the capital, they do not support using public funding for this purpose. Given that the state budget is constrained for a project the size of Nusantara, our analysis highlights the trade-offs for the public between raising taxes, borrowing with future repayment obligations, or reallocating funds from other government programs.
A capital idea? The welfare effects of relocating Indonesia’s government to a new city
Alexander D. Rothenberg (Syracuse University, Radine Rafols (The World Bank), Yao Wang (The Ohio State University) and Yi Jiang (Asian Development Bank)
Many developing countries are planning to create new capital cities, a place-making policy designed to alleviate congestion and respond to climate change. To evaluate growth and welfare effects, we specify a dynamic quantitative spatial model with public employment, informality, fiscal transfers, and frictions in trade and migration. We calibrate the model with data from Indonesia and conduct policy experiments studying the creation of Nusantara in East Kalimantan. Despite increasing employment in the new capital region, we find that building Nusantara reduces national growth and welfare. Climate change attenuates its negative welfare effects, but only slightly.
Closed captioning will be available for all online Zoom presentations.
Event Speakers
Aichiro Suryo Prabowo
Aichiro Suryo Prabowo is an Assistant Professor at Monash University, Indonesia. His research integrates sustainability principles into public budgeting and finance.
Thomas B. Pepinsky
Thomas Pepinsky is a professor of government at Cornell University. He specializes in comparative politics and international political economy, with a focus on emerging markets and a special interest in Southeast Asia.
Alexander Rothenberg
Associate Professor and Director of Doctoral Studies, Economics Department, Syracuse University