Central Government Transfers and Regional Economic Growth in Indonesia After Fiscal Decentralization: A Panel Data Analysis from 2005 to 2009
Wiwik Srihartini, Professor Jungbu Kim
2012 | Tesis | S2 Magister Ek.Pembangunan-
The relationship of fiscal decentralization on economic growth and regional income disparity has been debated by many scholars in the empirical literature. Building upon this literature, this paper investigates the relationship of intergovernmental transfers on both regional economic growth and income disparities using 238 regencies/municipalities from 31 provinces in Indonesia during 2005-2009. In order to examine the relationship, random effect model is utilized. The fiscal decentralization effect on economic growth is such that some of fiscal decentralization components such as general and specific purpose allocations are positively significant. Moreover, half of fiscal decentralization components have meaningful impacts on Theil T as a proxy of inequality. It is also found that the correlation is rather curvilinear such that only for those local governments that receive more than average per capita transfer amount, the effects tend to be positive with an increasing rate. However, especially for the model with Theil T, a rather low goodness of fit poses some caution in interpreting the results.
Kata Kunci : fiscal decentralization, economic growth, regional income disparity, random effect, Theil T, Indonesia
