FISCAL DECENTRALIZATION AND ECONOMIC GROWTH IN INDONESIA: A SIGNIFICANT REPRESENTATION OF ACHIEVING AUTONOMIC MANAGEMENT

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Keywords:

Fiscal Decentralization; Regional Economic Growth; Fund Allocations; Economic Capacity; Community Welfare; Autonomic Management.

Abstract

Considering the utmost significance of fiscal decentralization in creating and enhancing the effectiveness and efficiency of funds management leading to economic growth, the current study aims to address several concerns regarding the delegation of authority to the regional governments by conducting two independent studies in a developing nation, Indonesia. Study 1 examines the influence of FD on the economic growth of six provinces of Sulawesi Island, Indonesia, using secondary data from 2011 to 2020 regarding the support of the central government to the regional government via fund transfer schemes, i.e., General Fund Allocation (GFA), Special Fund Allocation (SFA), and Revenue Sharing Fund (RSF). Study 2 used data obtained from websites using the internet or relevant institutions' documentation comprising official publications/reports, i.e., regional regulations, budget documents, accountability reports, etc., to analyze the significance of FD in creating and enhancing community welfare. Study 1 results revealed the significant impact of transferred funds to different regions/provinces on their economic growth, depicting the independent nature of the regional ability. Study 2 showed the significant influence of FD on budget management and high economy capacity, resulting in enhanced community welfare. Hence, conducting two independent studies regarding regional economic growth and community welfare based on FD is a valuable addition to the existing literature addressing budget allocation and issues of unequal wealth distribution.

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Published

2023-08-31