Fiscal Decentralization and its Effect on Poverty Alleviation: Case Study of Indonesia (original) (raw)
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Poverty alleviation in the contex of fiscal decentralization in Indonesia
Economics & Sociology
Acceleration of poverty reduction in Indonesia is largely determined by the role of regional governments in implementing fiscal decentralization. Three indicators of fiscal decentralization were used to measure their effects on poverty reduction, i.e., regional government expenditures, regional government revenues, and intergovernmental transfers. This study investigated the panel data regression models for 33 provinces in Indonesia during 2010-2016. The results show that regional government revenues and intergovernmental transfers had a statistically significant effect on reducing poverty while regional government expenditures did not. This study confirms that in the context of fiscal decentralization in Indonesia, the increase of regional government revenues both from own source revenues and intergovernmental transfers appear to be more effective in encouraging poverty reduction than the increase of the total regional government expenditures. Therefore, it is very important for policymakers at the regional level to encourage the increase of regional revenues in order to create enough fiscal space to fund poverty alleviation programs on the one hand. On the other hand, it is necessary to increase the proportion of regional government expenditures to priority programs for poverty alleviation more than regional government operational expenditures.
Contribution Of Fiscal Decentralization To Poverty Reduction In Eastern Indonesia
2015
Eastern region of Indonesia has over 14 years received additional fiscal capacity and budgetary autonomy that focus on poverty in the context of decentralization but cannot become a potential driving force in improving the social welfare, therefore this study tried to analize the simultaneous effect of fiscal decentralization on poverty in Eastern Indonesia. Results of this research are; 1) Increased portion (ratio) of the total government transfer to total provincial revenues did not significantly affect poverty in eastern Indonesia, but has significant influence indirectly through investments and through economic growth; 2) Increased portion (ratio) total spending on health and education to total provincial revenues significantly affect poverty, but has no significant influence indirectly through investments and through economic growth.
POTENTIAL LINK PATTERNS OF FISCAL DECENTRALIZATION TO POVERTY REDUCTION IN INDONESIA
Fiscal decentralization is considered to give positive as well as negative impacts for development policy such as poverty reduction. The implementation of fiscal decentralization in Indonesia has changed the patterns of local governments' budget allocation for poverty reduction. Local governments have wider discretion to allocate their budget for poverty reduction strategy. This study aims at observing the potential link patterns of fiscal decentralization to poverty reduction in Indonesian provinces before and in the period of fiscal decentralization implementation. This study applies a descriptive analysis as a method for identifying the potential link patterns of fiscal decentralization to poverty reduction in Indonesia. Firstly, this study identifies the trend of several poverty indicators in Indonesia, namely 1) the percentage rate of poverty; 2) poverty gap index (P1) and poverty severity index (P2); and 3) Human Development Index (HDI). Secondly, the link of fiscal decentralization to poverty reduction in Indonesia is elaborated using the share of government budget expenditure on relevant sector to total expenditure and the percentage rate of poverty. This study shows that there is no clear link pattern of fiscal decentralization to poverty reduction in Indonesia. Three link patterns, namely positive link, negative link, and no link appear differently among provinces and regions. Several factors that support the conditions need to be elaborated more.
Does Fiscal Decentralization Affect Poverty? An Empirical Study
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The Poverty percentage in Central Java ranked two throughout Java Island after DI Yogyakarta Province. It surely causes gaps and inequality between regions in Central Java Province. This study attempted to analyze the effects of fiscal decentralization, fiscal balance fund, and economic growth on the poverty in 35 regencies/ cities in Central Java Province within 2016-2020. By using a quantitative approach, this study used a panel analysis with a Fixed Effect Model (FEM) method. Based on the results of panel data regression analysis results, fiscal decentralization and fiscal balance fund had no relationship with the poverty in Central Java. On the other hand, economic growth had positive and significant effects. High economic growth will reduce poverty rate when the economic activities carried out are padat karya which aims at absorbing workforce. High workforce absorption will reduce the poverty rate.
International Journal of Scientific Research in Science, Engineering and Technology, 2021
This study analyses the impact of fiscal decentralisation policy on economic development and poverty reduction. It focuses on the practice of intergovernmental fiscal transfer and on special autonomy policy in Aceh province, Indonesia, using data from 23 districts gathered from 2008 to 2018. Undertaking a panel data analysis, it will analyse the impact of intergovernmental fiscal transfer from central to local government on local government expenditure. The impact of local government expenditures and fiscal decentralisation practices on local gross domestic product (GDP) and poverty is also measured. The results show that several intergovernmental fiscal transfer policies in Aceh positively enhance the local expenditure. Further, the local government spending and fiscal decentralisation practices in Aceh improve the local GDP and reduce poverty levels in the region.
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Zenodo (CERN European Organization for Nuclear Research), 2022
This study aims to determine and analyze the effect of fiscal decentralization (balancing funds, local revenue, and infrastructure budget) on poverty levels through investment, economic growth, and income inequality. This study uses an explanatory design. The type of data used is panel data which is a combination of data from 34 provinces in Indonesia from 2015 to 2019. The analytical model used in this study is the Structural Equation Model (SEM) which is operated through the Analysis of Moment Structure (AMOS) program.
The Impact of Fiscal Decentralization on Welfare in Selected Provinces in Indonesia
Jurnal Bina Praja, 2020
One of the many ways to promote public welfare is fiscal decentralization. In this article, we focused on human development and poverty alleviation to indicate public welfare. Human resources have a pivotal role in a country because it determines the economic growth and development. In commercial terms, factors of production include labor, land, and capital. Therefore, the quality of human resources matters to determine the economic growth and development of a country. Since the emergence of the ASEAN Economic Community in 2015, growing a spirit of competition among countries, human development has been attractive. Furthermore, poverty was also considered as an interesting issue in Indonesia because it remained a problem since the country's independence 74 years ago. In 2016, Indonesia recorded the second-largest number of poor people in ASEAN. This paper aimed to analyze the impacts of fiscal decentralization on human development and poverty alleviation. The data used in this study were balanced panel data of six provinces and 112 regencies and cities in Java Island taken from 2011 until 2018. We used local governments' expenditures, revenues, and fiscal balances to measure fiscal decentralization in selected provinces in Indonesia, i.e., West Java, Central Java, East Java, Special Capital Region of Jakarta, Special Region of Yogyakarta, and Banten. The data were processed using the Ordinary Least Square method with EViews program. We found that decentralization policies statistically significantly affected human development and poverty alleviation. Therefore, this finding could be useful to develop targeted interventions aimed to increase local governments' revenues and reduce unnecessary local governments' expenditures to escalate fiscal space. The fiscal space could be used to fund programs that promote human development and alleviate poverty.
This study aims to analyze the effect of fiscal decentralization, income inequality, and economic growth on poverty rate of 33 provinces in Indonesia. The population of this study consists of 33 provinces in Indonesia. This study utilizes secondary data released by Statistics Indonesia (Badan Pusat Statistik/BPS) from 2009 to 2012. The data were analyzed using panel data regression on Eviews 7 software. The analysis comes to several findings. First, in short term fiscal decentralization and economic growth do not have significant effect on poverty rate while income inequality has significantly negative effect on regional poverty rate. Second, fiscal decentralization and economic growth possess significant and negative effect on regional poverty rate. In long term, regional poverty rate is decreasing in several provinces with high economic growth and high regional income. Third, income inequality does not give significantly negative effect on regional poverty rate. Decreasing income inequality may improve regional poverty rate even though the effect is in minuscule scale. Nevertheless, equitable development will happen in most Indonesia provinces in long term.
Do Fiscal Decentralization and Human Development Index Affect Poverty in Indonesia?
Proceedings of the 1st Aceh Global Conference (AGC 2018), 2019
The study aim is to analyze how the effects of fiscal decentralization and Human Development Index (HDI) on poverty in Indonesia. This study employ secondary data in the form of time series from 2010 to 2017, and cross section data consisting of 33 provinces in Indonesia, so that the type of polled data can be categorized that is a combination of time series data (for 8 years) with cross section data 33 Province in Indonesia. The analytical method used is PLS (Panel Least Square) with a comparison of two models namely the Fixed Effect and Robust Least Square models. From the results of the Fixed Effect regression model shows that DDF has a negative and insignificant effect on Poverty, while HDI has a negative and significant effect on Poverty. The study found that each additional unit of DDF reduced poverty by 10.97 percent if the HDI remains. In addition, the Human Development Index unit reduced the number of poor by 79.83 percent if the DDF remains. These findings implied that to reduce the poverty, efforts to improve HDI need to be focused.
The Effect of Fiscal Decentralization on Economic Development Performance in Indonesia
Jurnal Ekonomi & Studi Pembangunan, 2022
This study aims to test and analyze the effect of fiscal decentralization on Indonesia's development performance using a structural equation model. This type of data uses panel data from thirty-four provinces and five-year series (2015-2019), bringing the number of observations to 180. Data is sourced from the Directorate General of Fiscal Balance and the Central Bureau of Statistics (BPS). Data analysis uses a structural equation modeling-partial least square (SEM-PLS) with Smart-PLS 3. The evaluation results of the external model conclude that all indicators of fiscal decentralization variables and economic development performance variables are valid. The most powerful indicators that reflect the latent variables of budgetary decentralization are regional income ratios, and economic development performance indicators are economic growth. The results of the evaluation model found that there was a positive and significant effect of fiscal decentralization on economic development performance. Inequality of fiscal decentralization among the provinces in Indonesia caused the ratio of original regional income in research to have the lowest effect compared to the proportion of provincial revenues and expenditures.