The project of constructing Indonesia’s new capital, Nusantara, was launched in 2020 during President Joko Widodo’s second term in office. The project so far is the most significant public works project in modern Indonesian history.
Central to the public discourse on Nusantara are its costs and benefits. In this seminar, we invite Aichiro Suryo Prabowo (Monash University, Indonesia), Thomas B. Pepinsky (Cornell University) and Alexander Rothenberg (Syracuse University) to discuss their recent research on Nusantara. Aichiro and Thomas will discuss the public funding and public support for Nusantara, based on their forthcoming paper in the Bulletin of Indonesian Economic Studies. Alex will discuss his research on the growth and welfare effects of the planned capital.
Speakers:
- Aichiro Suryo Prabowo (Monash University, Indonesia)
- Thomas B. Pepinsky (Cornell University)
- Alexander Rothenberg (Syracuse University)
Date: Wednesday, 3 June 2026 (online in English)
Time: 08.00-09.30 WIB (GMT+7) || 11.00-12.30 AEST || Tuesday, 2 June 2026 at 21.00-22.30 EDT)
On Zoom: bit.ly/gs_indonesia (no registration required); On YouTube bit.ly/ip-live
Abstracts
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.
Thumbnail photo by Otorita IKN
Slides and video for past seminars:
