Determining the urban economic resilience planning through ratio of original local government revenue

Abstract

Today, the economic resilience in Indonesia measures using the index approach, but it does not consider the effect of the disturbance and causes meaningless. The index is essentially an average, and the average is not a model that captures the relationship between variables. This research differs significantly from earlier studies that used the index to measure economic resilience. The crucial step in assessing the economic resilience of a city is to determine the economic resilience decision variable itself. If a variable significantly correlates with the disturbance factors in each relationship pattern, it is considered suitable as an economic resilience variable. This study evaluates variable Z as an economic resilience variable with a significant relationship to its disturbance variable. The evaluation method is conducted in-depth by studying Indonesia's cities over five years (2015-2019). Z, the ratio of Original Local Government Revenue (PAD) to the number of poor people in a city as a cost centre, will be evaluated as a prospective decision variable for economic resilience. The statistical relationship between Z and 9 disturbance variables is examined using piecewise linear regression analysis. All 514 cities in Indonesia were observed extensively for identification during a five-year observation period. Rosenbrock pattern search estimation was used to estimate the model parameters. The following results were obtained by analysing the data with the STATISTICA software. As determined by parsimonious analysis, the price of Pertalite fuel and the US dollar foreign exchange are two disturbance factors that are crucial to the fall in the resilience variable Z. The joint effect of these two variables on the decline in the resilience measure Z is 73.63 percent. The study concludes that Z is a city-level economic resilience decision variable that applies to all 514 cities in Indonesia and is measured as the ratio of PAD to the number of poor people. This study's novel contribution to Indonesian policymakers is Z as a new economic resilience decision variable that can be used to assess cities' relative economic resilience.