Fiscal Decentralization in Comparative Perspective: Analysis of the Intergovernmental Grant Systems in Indonesia and Thailand

Abstract

Decentralization can inadvertently lead to local fiscal disparity. One type of intergovernmental fiscal transfers, the general-purpose grant, can help equalize local fiscal imbalances. This article examines the extent to which the general-purpose grant systems in Indonesia and Thailand help mitigate local fiscal disparity. The findings show that the general-purpose grant system in Thailand does not effectively address disparities in local fiscal conditions. Localities with more own-source revenues and higher per capita income receive more general-purpose grants than those with weak fiscal capacity. In contrast, Indonesia’s general-purpose grant allocation system provides more resources for economically disadvantaged and conflict-ridden provinces.