Essays on Inequality of Opportunities and Development Outcomes in Indonesia Umbu Reku Raya A thesis submitted for the degree of Doctor of Philosophy of The Australian National University October 2019 © Copyright by Umbu Reku Raya 2019 All Rights Reserved Declaration This thesis is a thesis by compilation. It contains no material that has been presented for a degree at this or any other university. To the best of my knowledge and belief, it contains no copy or paraphrase of work published by another person, except where explicitly acknowledged. All chapters were written under the guidance of my supervisor, Professor Budy Prasetyo Resosudarmo. Chapters 1 and 5 represents work solely undertaken by myself while chapter 2 is a case study on indigenous slavery on Sumba Island, the initial plan for my thesis. Chapters 2, 3 and 4 were done in collaboration with Professor Resosudarmo and it represents 85% of my contributions. Chapter 3, presents the case study on Austronesian-Hindu caste of Bali while chapter 4 deals with Muslim-Christian inequalities of opportunities. My contributions in these chapters covers the literature review, the residential survey on Sumba Island (a joint effort with Professor Resosudarmo), data analysis, choosing the appropriate dataset, reconstructing the caste information, the composition of the chapters as well as revision post presentation was undertaken by me. The chapters on indigenous slavery and Austronesian-Hindu caste in the thesis, as well as the preliminary version of the Muslim-Christian inequalities of opportunities, have been presented in various seminars at the Australian National University and several academic conferences. These conferences include the 2nd Indonesian Regional Science Association (IRSA) International Institute Conference in Bandung Indonesia (July 2009), ADEW 2015 in Monash University, and Indonesian Regional Science Association Conference in Manado Indonesia (July 2016). This thesis has had the benefit of advice on proofreading, consistency, and clarity provided by Trish van der End and Mark Bidwell. Both are not economists. I am responsible for remaining errors and omissions. _________________________________ Umbu Reku Raya Arndt-Corden Department of Economics Crawford School of Public Policy College of Asia and the Pacific The Australian National University i Acknowledgment This thesis is my academic work under the guidance of Professor Budy Prasetyo Resosudarmo. On the long road to completing this thesis, I am grateful for the excellent supports I received from various institutions and individuals. I would like to thank Professor Resosudarmo, my thesis supervisor. Professor Resosudarmo is the alpha and omega of my PhD journey. Not only that he was the first person educating me on the importance of obtaining higher degree research skills through PhD program, he also imparted the courage to dare to take risk on examining development issues outside my comfort zone. The financial support, thousands of hours of discussions, and two joint fieldworks in Papua and Sumba with him have helped me to gain some skills needed to become an independent researcher. Professor Resosudarmo forged me to become a critic loving individual; something I had difficulty accepting in my previous research environment. I would also like to thank the members of my supervisory panel, Dr. Robert Sparrow and Dr. Daniel Suryadarma whose critics and suggestions I appreciated very much. Dr. Sparrow was the first person who introduced me to skills on household survey and econometrics with STATA which I use intensively during the thesis process. I wrote this thesis using the computer I bought using the generous research assistance fees from Dr. Suryadarma. I thank Marcel Schroeder, Agung Widodo, and Samuel Weldeegzie who reviewed the earlier version of the three case studies of this thesis during the compulsory PhD seminar. I am grateful to Mark Bidwell who voluntarily proofread the final version of the thesis. At Arndt-Corden Department of Economics, I am very grateful for academic advice from Associate Professor Paul Burke, Professor Hal Hill, Professor Peter Warr, Associate Professor Ross McLeod, Associate Professor Chris Manning, Professor Prema-Chandra Athukorala, and Professor Raghbendra Jha. I am also grateful for the support of Dr. Iwu Utomo, Dr. Ariane Utomo, Professor Bruce Chapman, and Professor Jim Fox. My thanks also go to Dr. Heeok Kyung, Sandra Zec, Tracy McRae, and Dr. Megan Poore at Crawford School ANU for their great administrative and academic support. I am also grateful for my colleagues at ACDE and RSE: Dr. Omer Majeed, Dr. Samuel Weldeegzie, Dr. Mandy Yap, Dr. Michael Cabalfin, Dr. Marcel Shroeder, Dr. Manoj Pande, Dr. Nguyen Dang Tai, Yessi Fadilah, Agung Widodo, and Rus'an Nasruddin whose friendships and constant support I highly appreciated. I would hardly survive the tough coursework and research environment at the University without their company and lots of coffee and foods. ii I would also like to express my gratitude to the Australian Government through the Australia Awards scholarship for funding my study at the Australian National University. In particular, I would like to thank the AAS office in Jakarta - Andi Azka and colleagues - and at Crawford School - Billie Headon and colleagues - who had managed my study administration from the admission to the ANU until I continued with the off-shore program. I also want to thank my family and friends in Indonesia and Australia. In Sumba and Timor: My dearest mother Rambu Dulu Moha and my late father Umbu Saga Anakaka, the Kedamaki, Anakalang, Kurubeba, Galulangati, Panibi, Dangugallu, Wanukaka, Laipatedang, Kabelawuntu, Ummawaccu, Galubakul, Pasunga, Lairika, Mehangmata-Anawaru, Anajiaka, Sabatudung, Malisa, Turupadang, and Rammang families: thank you for the life, love, and prayers. In Australia: Kak Eli and John Phillips, Tante Vonny Mauboy, Tante Mar Lilo, Andrew and Yana Wallace, Pastor Yama and Mardiani Radimin and the Indonesian congregation, Pastor Geoff Findlay and WPC congregation, Cut Nuke, Kate McLinton, Column Graham, Dr. Andrey and Pam Damaledo, Frits and Silvia Nggili, Dr. Paul and Selfi Liu, Dr. Ida Bagus K. Manuaba, Dr. Yodi Christiani, Dr. Meks Ndii, and Kate Stevens: thank you for the prayers, advice, food, and company to various events and places in Australia. My colleagues at SMERU Institute, Dr. Sudarno Sumarto, Dr. Asep Suryahadi, Dr. Stella Hutagalung, Dr. Rizki Fillaili and Eja-san, and Joseph Marshan and Ruth Nikijuluw also provided constant support which I am forever grateful. My current and former bosses: Professor Fred Benu, my cousin Professor Umbu Datta, and my favorite research team-leader the late Professor Agustinus Benu, thank you for your constant support. I am forever grateful to Tony Karrys and staff at University House for excellent and generous accommodation services during the four years I lived in Canberra. The Lord bless you and keep you, Tony. Thanks also to my colleagues at the University House Dr. Andriati Fitriningrum, Dr. Khurrum Aftab, Dr. Lina Tan, and Muhammad Fae for sincere friendships and delicious foods. Dr. Daju Pradnja Resosudarmo and Prof. Budy Resosudarmo accommodated me in their Jakarta home for five months during which time I was able to draft the inter-religious case study. Blessed are the merciful. I also like to thank my respondents in the traditional residential in Sumba for their voluntary participation in the survey. I am grateful to Reverend Norlina Rambu Kalunga, Rector of Wira Wacana Christian University, for helping me and Professor Resosudarmo administering the residential survey in urban and remote residential in Sumba. Above all, my deepest gratitude to Ichtus from whom I learn the ancient Jewish philosophy that everyone is equal, fearfully and wonderfully made in homo imago Dei. I hope this thesis iii helps open up discussion on the necessity of fostering equality of development opportunities for the least among us, both in Indonesia and other places where inequality at birth is still the predominant worldview. Veritas vos liberabit. iv Abstract The inter-group gap in human capital is still a prominent public policy concern in the developing world where centuries-old institutions such as caste, indigenous slavery, and religious system create persistent unequal opportunities for development within the practicing society. The concern about inequality arises due to the bulk of scientific evidence that found that group preferences matter more than individual preferences when it comes to inter-group contestation for political power and its subsequent discriminative distribution of economic resources based on identity politics. This results in inequality of opportunities and, to some extent, inequality of development outcomes. In Indonesia, the interplay between the social identities and their power base in affecting inter-group gap in opportunity and development outcomes has been part of public policy debate, but empirical evidence relating identity politics as the determinant of inequality of opportunities and human development outcomes is limited. As such, the goal of this thesis is to present empirical evidence on the abovementioned topic. The study covers three different institutions in Indonesia. The first case study is the case of indigenous slavery with a little inter-class power dynamic between the nobility and the commoner classes on Sumba Island. Our estimation on 2015 Traditional Residential Survey dataset reveals that when the nobility monopolizes