Examining the Link between Democracy and Inclusive Economic Growth in Southeast Asia (A comparative study of Indonesia, Malaysia, Thailand, and the Philippines) - - FADILLAHPUTRA i Examining the Link between Democracy and Inclusive Economic Growth in Southeast Asia (A comparative study of Indonesia, Malaysia, Thailand, and the Philippines) FADILLAH PUTRA Submitted in total fulfilment of the requirement of the degree of Doctor of Philosophy January 2017 School of Social and Political Science University of Melbourne ii Abstract Embedded in all our assumptions and hopes for democracy is the belief that a democratic system will make life better, economically and socially, for its citizens. Given this almost universal assumption it is surprising how little we really know about the impact of democratisation upon the welfare of citizens and the variables linking the two. This thesis investigates the impact of democracy on Inclusive Economic Growth, and mainly questioning: “Does democracy matter in the delivery of larger and more effective social policies that improve inclusive economic growth? ”The four cases selected to empirically analyse the relationship among the three variables (democracy, social policy, and inclusive economic growth) are Indonesia, Malaysia, Thailand, and the Philippines. The finding is social policy is one of the potential variables linking the two; especially when the development of democratic institution run stably and the vast majority of the people support it. In other words, social policy becomes an important variable to test the link between democracy and inclusive economic growth. iii Declaration This is to certify that: (i) the thesis comprises only my original work towards the PhD, (ii) due to acknowledgement has been made in the text to all other material used, (iii) the thesis is less than 100,000 words in length, exclusive tables, maps, bibliography and appendices. Fadillah Putra iv Acknowledgment I would first like to thank my advisor Prof. Helen Sullivan for having been a tremendous mentor for me, for her patience, motivation, and immense knowledge. I also would like to thank the rest of my thesis committee: Prof. Mark Considine, and Dr. Aaron J. Martin for their insightful comments and encouragement which stimulated me to widen my research from various perspectives. I am highly indebted to Directorate of Higher Education, Ministry of Education, Republic of Indonesia that provided the necessary financial support for my study. Finally, I would like to thank my wife, Praadilla Surilansih and our daughters (Nayla Damai VP, Annida Muliahati, and Putri Malyakasmira) for being very supportive and always be there cheering me up and stood by me through the good and bad times. v Table of Contents Abstract....................................................................................................................... iii Declaration ................................................................................................................. iv Acknowledgment ....................................................................................................... v Table of Contents ...................................................................................................... vi List of Tables .............................................................................................................. ix List of Figures .............................................................................................................. x Chapter One Introduction ......................................................................................... 1 1.1 The Link between Democracy and Inclusive Economic Growth............... 4 1.2 Historical Institutionalism and the Development of Democracy .............. 6 1.3 Case Selection .................................................................................................... 7 1.4 Comparative Research ................................................................................... 24 1.5 Research Questions ......................................................................................... 26 1.6 Outline .............................................................................................................. 28 Chapter Two Democracy, Social Policy, and Inclusive Economic Growth ...... 30 2.1 Democracy and Inclusive Economic Growth ............................................. 31 2.2 Social Policy as Potential Intermediating Variables .................................. 34 2.3 Research Method: Mediation Analysis with PLS-SEM ............................. 39 2.3.1Hypotheses .................................................................................................................. 43 2.3.2 Construct and observed variables ................................................................... 44 2.3.3 Quality Criteria (Goodness-of-Fit) overall Model Test.......................... 45 2.3.4 Indicators and Data Sources .............................................................................. 45 2.3.5 Changes over-time and Lagging Data ........................................................... 49 Chapter Three Results of Mediation Analysis (PLS-SEM) in Indonesia, Malaysia, Thailand, and the Philippines ............................................................... 53 3.1 Indonesia .......................................................................................................... 55 3.1.1 Data Description ...................................................................................................... 55 3.1.2 PLS-SEM: Results and Interpretation ............................................................ 60 3.1.3 Testing of Hypotheses .......................................................................................... 67 3.2 Malaysia ........................................................................................................... 69 3.2.1 Data Description ...................................................................................................... 69 3.2.2 PLS-SEM: Results and Interpretation ............................................................ 74 3.2.3 Testing on Hypotheses ......................................................................................... 80 3.3 The Philippines ................................................................................................ 82 3.3.1 Data description ....................................................................................................... 82 3.3.2 PLS-SEM Results and Interpretation ............................................................. 87 3.3.3 Testing of Hypotheses .......................................................................................... 93 3.4 Thailand ............................................................................................................ 94 3.4.1 Data description ....................................................................................................... 94 vi 3.4.2 PLS-SEM Result and Interpretation ............................................................... 99 3.4.3 Hypotheses Testing .............................................................................................. 106 3.5 Discussion on Quantitative Analysis Findings ........................................ 107 3.5.1 Comparative Analysis of PLS-SEM Results .............................................. 108 Chapter Four The Development of Democratic Institutions and Their Impact on Social Policy and Inclusive Economic Growth .............................................. 116 4.1 Analytical Framework .................................................................................. 117 4.1.1 New Institutionalism Approach .................................................................... 117 4.1.2 Historical Institutionalism ................................................................................ 121 4.1.3 Democracy and Political Institutions. .......................................................... 130 4.1.4 Models of Democracy ......................................................................................... 135 4.1.5 Democratisation and Regime’s Stability .................................................... 142 4.2 Research Method: Process Tracing ............................................................. 144 4.2.1 Process Tracing Method and Historical Institutionalism ................... 145 4.2.2 The Strengths and Weaknesses....................................................................... 146 4.2.3 Types of Process Tracing ................................................................................... 147 4.2.4 Data Sources ............................................................................................................ 148 4.2.5 Steps ............................................................................................................................ 150 Chapter Five Democratisation in Southeast Asia and Its Impact on Social Policy and Inclusive Economic Growth ............................................................... 153 5.1 Indonesia ........................................................................................................ 154 5.1.1 The Development and Changes of Democracy in Indonesia ........... 154 5.1.2 The Development and Changes of Social Policy in Indonesia ......... 158 5.1.3 Democracy and Social Policy in Indonesia during 1973-2013 .......... 160 5.2 Malaysia ........................................................................................................