Abstract
In Indonesia, the implementation of fiscal decentralization has entered the 9th year, however, so far many problems and obstacles which is faced during the implementation to stimulate economic growth and reduce poverty. This study aims to analyze: trend of government expenditure in decentralization era and regional autonomy during 2001-2009 and fiscal decentralization degree in Indonesia. This objective is achieved through descriptive analysis using secondary data for 2001-2009. The result shows central government expenditure tends to decreased and transfer expenditure increased significantly every year in absolutely, but annual growth rate fluctuated considerably. This indicates the allocation portion of the transfers was unstable. The largest component of transfers is fund balance and tends to increase every year significantly, fiscal decentralization degree at districts/city and province increased in 2007-2008. It is recommended to regional government to allocate public interest bigger than for government administration such as personnel government spending.
Highlights
Fiscal decentralization is one of the most interesting issues in the theory of state and local finance, and has helped to globalize the world
Jurnal Ekonomi Pembangunan Volume 13, Nomor 1, Juni 2012: 1-17 parities between central and regional governments and regions, (2) to improve the quality of public services in the area and reduce public service gaps among regions, (3) to improve the efficiency of utilization of national resources, 4) to strict governance, transparency, and accountability in the allocation of activities transferred to the regions targeted, timely, efficiency, and fair, and (5) to support sustainability fiscal macroeconomic policy
Some goals may conflict with one another, and, to the extent that objectives are not consistent, hard choices will have to be made. The purpose of this policy is to provide a basis for evaluating the relative success of the implementation of a fiscal decentralization program
Summary
Fiscal decentralization is one of the most interesting issues in the theory of state and local finance, and has helped to globalize the world. Many empirical studies have examined the impact of fiscal decentralization on the economy of a country such as economic growth and poverty. The relationship between fiscal decentralization and economic growth has been examined by many empirical studies (Phillips and Woller, 1997; Zhang and Zou, 1998; and Martinez-Vazquez and McNab, 2001; Rodriguez-Pose and Kroijer, 2009). Fiscal decentralization has a negative effect on economic growth in China (Zhang and Zou, 1998), Phillips and Woller (1997) in developing countries and a positive influence on economic growth in developed countries (Martinez-Vazquez and McNab, 2001; Rodriguez-Pose and Kroijer, 2009). Several other studies examined the relationship between fiscal decentralization and poverty (Martinez-Vazquez and McNab, 2001, Susan, 2005). Martinez-Vazquez and McNab, (2001) concluded that the policy of spending more precise than the revenue policy. World Bank (2007) recommends that the problems of poverty can be overcome by making the pro poor budgeting
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