Does Democratization Promote Competition?: Indonesian Manufacturing Pre and Post Suharto

Abstract

Does democratization promote economic competition? This paper documents that the disruption of political connections associated with Suharto's fall had a modest pro-competitive effect on Indonesian manufacturing industries in which his family had extensive business interests. Firms with connections to Suharto lost substantial market share following his resignation. Industries in which Suharto family firms had larger market share during his tenure exhibited weak improvements in broader measures of competition in the post-Suharto era relative to industries in which Suharto firms had not been important players.