Central Government Transfers Research Articles

Map to prosperity: Natural resource revenue sharing and infrastructure development in Indonesia

The well-being of society can be realized through meeting basic needs, one of which is providing public infrastructure. This study examines the role of Natural Resource Revenue Sharing Funds (DBH SDA) on government investment in infrastructure in 491 regencies/cities in Indonesia. The testing in this research uses panel data regression analysis. The results show that per capita DBH SDA in Indonesia during the study period of 2010–2012 has a significant and positive influence on government investment in infrastructure. The selection of this period is based on the consideration that a resources boom has occurred, where there is an increased global demand for natural resource commodities followed by an increase in commodity prices, thereby positively impacting revenue for countries or regions abundant in natural resources. Despite DBH SDA having a significant and positive influence, regional spending on infrastructure tends to be more influenced by central government transfers such as General Allocation Fund (DAU), Special Allocation Fund (DAK), and Local Own-source Revenue (PAD). It was found that government investment in infrastructure tends to be influenced by transfer funds, indicating that the role of the central government remains significant in determining the infrastructure expenditure of regencies/cities in Indonesia.

BUDGET DECENTRALISATION: RESULTS AND CURRENT CHALLENGES

The purpose of the paper is to analyse the results of budgetary decentralisation in Ukraine, to identify the factors that have the greatest impact on its success, and to identify the urgent tasks for improving the financial capacity of hromadas. Results. The article analyses the content of the strategies for reforming the public finance management system for 2017-2020 and 2022-2025, as well as the reports on the implementation of the Strategy for the period February 2017 – December 2019 and for 2022. The paper identifies the main achievements and unresolved issues of implementation of these strategies. The study highlights the factors that have the greatest impact on the success of the implementation of the tasks of reforming the public finance system. The coefficients of budgetary centralisation and decentralisation are calculated on the basis of expenditures of the Consolidated, State and local budgets. The article examines the results of a survey of local government representatives conducted in 2023 from April 27 to May 4 by the Kyiv International Institute of Sociology within the framework of the Sectoral Support Initiative for Civil Society in Ukraine project on the availability of post-war recovery plans in hromadas. Value / Originality. The undisputed results of the budget decentralisation for the period 2017-2020 include an increase in the volume of local budgets' own financial resources and a certain improvement in the quality of public services provided to consumers, but it is noted that the goals of the Strategy for Reforming the Public Finance Management System were not achieved during this period. The authors note a significant improvement in the quality of strategic planning in 2021 compared to 2016. It is emphasised that the implementation of most of the budgetary decentralisation measures planned in the latest Strategy was prevented by the full-scale war with Russia. Among the unresolved issues of the reform are the following: significant dependence of local self-government on central government transfers, duplication of functions by district and regional state administrations, low human and institutional capacity of local self-government bodies, and the procedure for administering local taxes. One of the urgent tasks of budgetary decentralisation is the need to develop and implement post-war reconstruction measures.

LOCAL FINANCES IN WESTERN BALKAN COUNTRIES: FOCUS ON OWN -SOURCE REVENUES AND CAPITAL INVESTMENTS

This study examines the fiscal dynamics of local governments’ finances in the Western Balkan countries, focusing on their own source revenues and capital investments, made from the municipalities. While spending for capital investment has increased in nominal terms, the share of municipal spending on capital investments has been downwardly unstable over the past 16 years. In addition to central government transfers, several significant factors contribute to the determination of municipal own-source revenues, including central and local public investment, current expenditures, and municipal development index. The study reveals that capital investment depends on its own source revenues or capital transfers from the central government, where local capital expenditure emerges as a robust determinant, exerting a stronger influence on municipal fiscal autonomy compared to central government investments. This finding underscores the importance of local capital expenditure in enhancing fiscal independence at the local level. This research emphasizes the need for a comprehensive understanding of investment allocation, development indicators, and promoting local revenue mobilization. The findings suggest that enhancing local fiscal autonomy requires a shift in policy focus towards stimulating local capital expenditure and prioritizing human development. By identifying the factors that influence municipal own-source revenues, this study provides valuable insights for local management in strengthening the financial capacities of local governments in the Western Balkan countries.

The determinants of the financial distress of Italian municipalities: How much is it due to inadequate resources?

The key question addressed in this work is whether financial distress recently experienced by several Italian municipalities can be at least partially imputed to the inadequacy of the financial resources they suffer compared to the needs of their populations and their territories. Starting from a multidimensional definition of financial distress, we investigate this issue by exploiting the variability across municipalities revealed by two different occurrences recently involving the intergovernmental fiscal relations in Italy: on the one hand, the large cuts in vertical transfers carried out by the central government as part of the fiscal consolidation strategy in the period 2014–2015 which affected single municipalities to varying degrees; and, on the other hand, the introduction of a new mechanism of equalization transfers at municipal level which showed how the gap between available financial resources to local needs is differentiated across municipalities. Exploiting these sources of variability across local authorities, the estimation results show that the Italian municipalities which suffer a level of resources lower than that necessary to provide public services at a standard level are, ceteris paribus, more likely to run into financial difficulties. By the same token, large cuts in central government transfers have a statistically significant effect on financial vulnerability at municipal level.

Dampak Pendapatan Asli Daerah (PAD) dan Pendapatan Transfer Pemerintah Pusat terhadap Belanja Daerah di Jawa Timur Tahun 2018-2022

This study aims to determine how the influence of local revenue (PAD) and Central Government Transfer revenue on regional spending in East Java in 2018-2023 and how much influence partially or simultaneously. The Data used is secondary data obtained from the official website of the Directorate General of financial balance (DGT). Sampling technique using purposive sampling. The number of samples in this study is 117 normally distributed samples. The analysis used is multiple linear regression analysis, by testing classical assumptions first. The R-Square test is used to test the accuracy of the model. As for the hypothesis test using T test (partial) and F test (simultaneous). Based on the results of research that has been done, local revenue (PAD) and Central Government Transfer revenue respectively have a positive and significant effect on regional spending. Simultaneously or jointly local revenue (PAD) and Central Government Transfer revenue significantly affect regional spending.

Accountability and fiscal transfer: The perfect duo for enhancing the regional economy

Each region in Indonesia receives varying amounts of fiscal transfers from the central government, influenced by regional characteristics and accountability. This study examines the impact of fiscal transfers with accountability as a catalyst for the economic growth of Indonesia's regions proxied by gross regional domestic income. The independent variables are the General Allocation Fund (DAU), Special Allocation Fund (DAK), and Revenue Sharing Fund (DBH), while accountability as control variables proxied by BPK audit findings, bureaucratic reform (RB), SAKIP, and APIP scores. Data from 34 provinces over 2016-2020 (170 observations) were analyzed using a fixed effects model and Panel Corrected Standard Error regression. This research fills a gap by examining the simultaneous effects of fiscal transfers on economic growth. The findings indicate that fiscal transfers significantly impact regional economies. The DAK has the highest effect, followed by DBH and DAU. Accountability, measured by APIP, SAKIP, RB scores, and BPK audit findings, is essential for efficient use of transfer funds. BPK audit findings negatively impact the regional economy, underscoring the need for regional governments to improve accountability to optimize central government transfers and support economic growth. Thus, fiscal transfers and accountability are pivotal for enhancing regional financial management and economic performance.

Government infrastructure investment stimulation through booming natural resources: Evidence from a lower-middle-income country.

The dynamics of central government funding to regions depend on local investments. In regional autonomy, local governments are encouraged to be more self-reliant from the central government. For regions with high natural resource yields, they will not encounter difficulties in meeting their fiscal needs. Community welfare can be realized through fulfilling basic needs, one of which is infrastructure development. High-quality infrastructure will be able to contribute to further progress in trade, thus enhancing production efficiency. The objective of this research is to analyze the extent of the influence of central government transfer funds, especially the Natural Resource Revenue Sharing Funds (DBH SDA), on local government investments in infrastructure across 508 districts/cities in Indonesia. The method used is dynamic panel regression using the Generalized Method of Moment (GMM) Arellano-Bond approach. This study finds that the role of DBH SDA is still low in infrastructure spending. The role of the central government remains significant in determining infrastructure spending at the district/city level in Indonesia. This indicates that local governments rely more on other sectors in infrastructure investment. By enhancing the role of DBH SDA through technological advancements, it is hoped that the market value of natural resources can be higher through resource downstreaming. This strategy will have broader impacts, as labor needs can be absorbed not only in raw material production activities but also in the processing technology sector. Furthermore, the utilization of natural resources with modern technology can increase extraction efficiency, support sustainable development, and minimize environmental impacts.

Intergovernmental Transfers and Local Revenues Again—A Relook at the Ghanaian Local Government Case

This paper revisits options for strengthening local governance by increasing own revenues in local government jurisdictions. Using stochastic frontier and recursive structural equation methods, the paper estimates the effects of central government transfers and tax effort on own revenues in the Ghanaian local government system. Results show that contrary to some recent findings that transfers reduce own revenues for local jurisdictions in Ghana, increasing transfers to local jurisdictions increases (rather than reduces) own revenues in Ghana. Further, local government performance in public service provision was found to be critical for increasing own revenues. Making the Ghanaian local government system more sustainable thus requires increasing central government transfers and providing technical support to strengthen the relationship between available public services and own revenues.

Does the Flypaper Effect Phenomenon Occur on the Financial Performance of Provincial Governments in Indonesia?

The purpose of this research is to detect the flypaper effect phenomenon on the financial performance of provincial governments in Indonesia. This research uses one dependent variable, namely regional expenditure and two independent variables, namely the General Allocation Fund (GAF) and local own-source revenue (OSR). The data used in this research is secondary data in the form of panel data consisting of time series data (2018-2022) cross section with the number of observations as many as 33 provinces. Then, this research data was collected from the Directorate General of Financial Balance, Ministry of Finance of the Republic of Indonesia and other supporting reports. This research was analyzed using panel data regression analysis. Based on the results of panel data regression, results were obtained Based on the results of panel data regression, results were obtained that partially each variable local own-source revenue (OSR), The General Allocation Fund (GAF) has a positive and significant impact on the regional level of exploration in Indonesia. Meanwhile, simultaneously local own-source revenue (OSR), General Allocation Fund (GAF) has a positive and significant impact on regional expenditure in Indonesia with an Adjusted R-squared amount of 97.07 percent. Then, if you look at the flypaper effect phenomenon, it can be concluded that there is a flypaper effect on the financial performance of provincial governments in Indonesia. Based on the results of this study, each provincial government in Indonesia should increase Local Own-Source Revenue (OSR) to be used as the main source of regional expenditure, then local governments should also prioritize the use of regional expenditure for productive things, so that the existence of central government transfer funds can increase the independence of government financial performance and ultimately can minimize dependence on the central government.

Cash Budget as Internal Control in Regional Cash Financial Management

The case study was conducted at the Pandeglang Regency Government, where an urgent need arose when central government transfer funds experienced changes in distribution. The research aims to explain the function of the cash budget in the public sector to achieve efficiency and effectiveness in regional cash management, especially in APBD planning and decision-making regarding the availability of regional government finances. The research method used is qualitative and comparative, namely analyzing certain situations, cases, or groups. The financial management situation of regional cash was analyzed by comparing the before and after implementation of the cash budget as internal control in cash management in Pandeglang Regency. The research results show that the role of the cash budget as an internal control can improve activity planning, cash administration, and activity reporting. The cash budget has also been proven to increase the efficiency and effectiveness of regional cash management, as can be seen from the significant reduction in excess financing. Implementing the cash budget allows the Pandeglang Regency Government to calculate minimum cash and invest the funds to obtain deposits, optimizing the use of funds.

Countercyclical central government transfers incentivize local government overborrowing: Theory and evidence

Local governments in China have strong incentives to overborrow, leading to unsustainable local debt. Recent research suggests that higher central government transfers serve as a key incentive for local governments to overborrow. This paper constructs a theoretical model and shows that it is the countercyclicality of central government transfers, that is, the negative correlation between transfers and local revenues, that act as the main incentive for local governments to overborrow. We test the model predictions using hand-collected provincial data on local government debt and budgets. The empirical evidence strongly supports the prediction that the negative correlation—not the magnitude—of central government transfers is the main driver of the incentive for local governments to borrow excessively. The countercyclical nature of central government transfers provides insurance against local government debt service, thereby increasing the incentive for local governments to borrow. The findings suggest the need to change the central government transfer policy framework.

Efficiency Analysis of Central Government Transfer Funds to the Regions Income Inequality

Efficiency Analysis of Central Government Transfer Funds to the Regions Income Inequality

Intergovernmental environmental affairs division and environmental public services supply: Evidence from 289 cities in China

The reasonable division of intergovernmental environmental affairs is the institutional basis for solving environmental pollution problems. This paper conducts an empirical test using panel data from cities in China. We find that: (a) environmental decentralization significantly improves the supply efficiency of environmental public services (ESE). It's mainly because of the increased capacity for green technology innovation and urban environmental infrastructure development brought about by environmental decentralization. (b) Environmental decentralization will improve the ESE more effectively in regions with the central government acting as a binding force, high environmental preferences, governance capacity of local governments, and pollutant emission intensity. (c) Higher promotion incentives for officials may distort the pollution control effect of environmental decentralization and inhibit the ESE. Appropriate central government transfer payments can better utilize the positive role of environmental decentralization.

Effect of Fund Transfer, Revenue on Development Index as Moderation Variables

One of the instruments to measure the level of success of a country in carrying out development is the human development index calculation approach. In essence, development is a change towards better conditions so that as a result of development activities it will have implications for the emergence of a budget and ultimately money is needed to realize development activities. During the twenty-four years of implementing fiscal decentralization in Indonesia, the number of transfers to the regions has increased significantly. However, efforts to increase regional revenues are often neglected, so that the goal of fiscal decentralization towards self-sufficient regional government funding has not been achieved to date. This study examines quantitatively how the influence of money arising from development activities, namely Central Government Transfer Funds and Regional Original Revenues, can generate benefits or whether the realization of the budget spent by local governments, namely Capital Expenditures, can generate a certain value or benefit for the community, so that in this study can be described through the human development index instrument. The sampling technique used in this study was purposive sampling. The data used in this study is secondary data obtained from the Central Bureau of Statistics and the Directorate General of State Financial Balance. The research method used is panel data regression with the Fixed Effect Model (FEM), where the data collected is cross-sectional data, namely 414 districts/cities in Indonesia for the period 2012 to 2020 which are time series data. The results obtained show that: (1) DTPP has a positive and significant effect on HDI; (2) PAD has a positive and significant effect on HDI; (3) Through capital expenditure mediation, DTPP has a negative and significant effect on HDI; and (4) Through the mediation of capital expenditure, PAD has a positive and significant effect on HDI..

ANALYSIS OF THE FISCAL CAPACITY OF DISTRICT AND CITY GOVERNMENTS IN THE EAST NUSA TENGGARA PROVINCE

This study aims to analyze the fiscal capacity of districts and cities in East Nusa Tenggara Province through the analysis of the degree of decentralization and fiscal capacity index. Data were analyzed using the degree of fiscal decentralization formula and the calculation of the fiscal capacity index. The results showed that on average, districts and cities in East Nusa Tenggara Province have a low degree of decentralization of 7.99% and are in the very low fiscal capacity index category of 0.442-0.515. The largest contribution to the allocation of regional expenditure comes from central government transfer funds.

Analisis Pengaruh Pertumbuhan Ekonomi, Tingkat kemiskinan dan Indeks Kemiskinan terhadap besaran APBD di Provinsi Sumatera Selatan

Some regencies/cities that have big Regional Government Budgets (RGB) come from Revenue Sharing Fund of Natural Resource show their economicindicators are lower than other regions. This study does to knowand analyse a correlation of RGB to economic growth, poverty level and Human Development Index at 17 regencies/cities of South Sumatra Province. The research data are from 2013 to 2017 come from BPKAD and BPS, and using quantitative research method that used descriptive statisticalanalyses to test each variable and analytic statistical analyses which is used scoring analyses and simple regression analyses.Revenue Sharing Fund is a component of central government transfer as one of RGB components so the bigger Revenue Sharing Fund of a region the bigger RGB of that region. Scoring analyses shows some regions that have big RGB in 2017 do not have better rankings and vice versa, some regions that have small RGB get better rankings. Simple regression analyses, from 2013 to 2017, shows that a RGB does not have a correlation to economic growth, poverty level and Human Development Index at 17 regencies/cities of South Sumatra Province. Hence, the bigger RGB is not significant its correlation to the increasing of economic growth, the decreasing of poverty level and the increasing of Human Development Index. Keywords: Economic Growth, Poverty Level, HDI

Pengaruh Pendapatan Asli Daerah dan Dana Perimbangan terhadap Financial Performance Pemerintah Daerah pada Kawasan Strategis Nasional Gerbangkertosusila

To achieve optimal fiscal decentralization, each district/city must be able to manage its resources in an successful and proficient way. This could be accomplished through local autonomy, over fragmentation. The purpose of this study is to analyze the impact referring to local native income, variables and central government transfer fund variables on the financial execution of the Rule / City Government of the Gerbangkertosila Area of East Java. Regarding the research written by the author, the area used is a report on the implementation of the 2017-2021 city budget for the national strategic area of Gerbangkertosusila, which uses quantitative methods and emphasizes variables of local original income, central government transfer funds and financial performance. The tools used by the authors in this study were processed using SPSS 26 software. The selection of data analysis methods for hypothesis testers from existing variables is using multiple linear regression analysis methods. From various tests conducted by the author, the research results are concluded as follows: (1) Regional Original Revenue has a positive effect on financial performance, meaning that increasing regional original income means also increasing the financial performance of the local government gatekertosila, (2) the balance of funds has a negative effect on financial performance capabilities. In other words, the increase in central government transfer funds will reduce the financial performance of the Regional Government of the Gerbangkertosusila Area.
 Keywords: Original Local Government Revenue, Balancing Fund, Financial Results

The Determinant of Human Development in Eastern Part of Indonesia during 2012-2020

Improving human resource quality in Eastern Indonesia has become a primary concern in many development programs enacted in Indonesia. The KTI regions needed to catch up and often experienced development problems. Several challenges, such as the significant disparity in education and health facilities compared to the western part of Indonesia, have hindered the development process of KTI. This research aims to find the determinants of human development in KTI. We analyze the regional fiscal dependency ratio, employment level, allocation of DAU (general allocation fund) by the central government, and poverty gap level as determinants of the Human Development Index in KTI. Using the Fixed Effect panel data analysis, we found that the general allocation fund, employment, and fiscal dependency ratio are positively associated with HDI in KTI regions. In contrast, the poverty gap is negatively associated with HDI in KTI regions. Our empirical finding implies that central government transfers play an essential role in the human development process, while the poverty problem is one of the main obstacles to improving the human resources quality in KTI regions.JEL Classification: H80, L38, O15How to Cite:Khairina, N., & Wijaya, A. (2023). The Determinant of Human Development in the Eastern Part of Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 12(1), 83-96. https://doi.org/10.15408/sjie.v12i1.29496.

Vertical Fiscal Imbalance and Public Service Expenditure: Effects on Economic Growth Before and During Covid-19 Pandemic

Since 2020, Indonesia has been facing the Covid-19 pandemic for 2 years. Many impacts caused by the Covid-19 pandemic, especially on the economy, have led to a recession. Regional revenues are disrupted during a recession so local governments depend on central government transfer funds. From these issues, researchers suspect that there was a change in the decentralization conditions in East Java province during the Covid-19 pandemic as it was the province with the second largest GDP and has also experienced the greatest impact in Indonesia. This research method uses multiple linear regression with cross-sectional data from 38 district/city data units in East Java province. The results of this study are that the Decentralization Fund, Civil Service Capital Expenditure and the Human Development Index did not change before and during the Covid-19 pandemic. While the vertical fiscal imbalance has a positive influence on economic growth before the Covid-19 pandemic, the vertical fiscal imbalance has no influence on economic growth. This shows that there is another shift in priority in the use of central government finances, as state money is refocused and reallocated to deal with Covid-19. This makes development programs in other health sectors postponed.

ANALISIS TAX EFFORT DAERAH DI INDONESIA

This study was conducted to analyze the effect of central government transfers on regional taxation efforts covering districts/cities in Indonesia in the 2015-2019 range after the enactment of Law Number 28 of 2009 concerning Regional Taxes and Regional Levie/ Pajak Daerah dan Retribusi Daerah (UU PDRD). This study uses a quantitative analysis approach, with an econometric model of panel data regression (unbalanced panel. The data used is in a span of 5 years, starting from 2015 to 2019 in regencies/cities in Indonesia except for cities in DKI Jakarta Province. The dependent variable used is Tax Effort is used, while the variables used in this study include General Allocation Fund/ Dana Alokasi Umum (DAU), Special Allocation Fund/ Dana Alokasi Khusus (DAK), Revenue Sharing Fund/ Dana Bagi Hasil (DBH), Population, Poor Population, and Administrative Status. Based on the results of panel data processing using regression analysis techniques, it shows that the central government transfer funds allocated to the regions through the General Allocation Fund (DAU) and the Special Allocation Fund (DAK) have a negative effect on tax effort, while the Revenue Sharing Fund (DBH) has a negative effect on tax effort. positive on regional tax effort. In addition, the results of the study also showed that the population had a negative effect on the tax effort, the number of poor people had a positive effect on the tax effort and administrative status which indicated whether the area was included in the status of a city or district area did not affect the regional tax effort. With the research results obtained, it can provide an overview of the behavior of local governments in responding to the mechanism of fiscal decentralization, especially with the many types and amounts of transfer funds to the regions, coupled with the transfer of authority to manage Rural and Urban Land and Building Taxes/ Pajak Bumi dan Bangunan Perdesaan dan Perkotaan (PBB P2) and Land Rights Acquisition Fees and Buildings/ Bea Perolehan Hak Atas Tanah dan Bangunan (BPHTB) become part of the district/city local government.