That was done in ArcGIS, and while I know how to do it there, I don't think it looks good enough, I would like to do that inner outline as more of a soft gradient. I use Illustrator CS6 fairly often with my maps for the finishing touches but I don't have any formal training. I mostly try stuff until it looks right. After doing some playing around, I was able to come kind of close like the picture below:
I did that by making the region's fill brown, and selecting the Inner Glow tool (mode: normal, opacity 80%, blur 0.3 in, edge). However, problem with that is that the white part of the region is a white fill, so if I layer it on top of my map I won't be able to see all the stuff on the map underneath it. If I make the white fill "no fill" I lose the inner glow effect.
Any suggestions on how to create that effect on the inside of the border in Illustrator or even ArcGIS desktop? I exported my map from ArcGIS as a pdf, and opened it up in Illustrator to work on this.