Local Government Expenditure Research Articles

Political Budget Cycle and Financial Losses: An Indonesian Case

This study aims to test the Political Budget Cycle (PBC) in Indonesia as one of the world's largest democracies, specifically testing the presence of PBC across types of local government expenditures. This study further analyzed the effect of changes in expenditure composition during election years on financial local government losses. The financial losses are defined as irregularities in regional finance management found in the Audit Board of The Republic of Indonesia (BPK) audit report. This study uses the data at the district and city levels (local expenditures and financial losses) from 2014 to 2019 and adopts a fixed-effect panel data specification. The empirical estimations show the following evidence: (1) PBC phenomenon occurs in Indonesia, especially on government grants (belanja hibah), expenditure on goods and services, and capital expenditures; (2) There was no difference in PBC behavior between a region having an incumbent running for re-election and a region with incumbents from the previous election; (3) The existence of PBC tend to increase local government (financial) losses.

Зарубіжний досвід проведення децентралізаційних змін: уроки для України

Розглянуто зарубіжний досвід проведення реформи адміністративно-територіального устрою та децентралізації державного управління, перерозподілу повноважень, зміни у бюджетних відносинах країн Балтії та Хорватії. Зазначено, що питання децентралізації є першочерговими в умовах розвитку місцевого самоврядування та забезпечення його спроможності самостійно, завдяки власним ресурсам, вирішувати проблеми місцевого значення.

Robot application and occupational injuries: Are robots necessarily safer?

Recent research argues that robots could replace workers in dangerous work environments to reduce occupational injuries. However, robot development and usage in most developing countries remain at an infant stage, robots may increase the likelihood of occupational injuries due to conditions such as limited human capital and defects. By using a city-level dataset based on the Guangdong Province in China, we find that robot application is associated with an increase in the rate of occupational injuries in the first two years, and then exhibits nonsignificant and even negative effects afterwards. We also find that local governments can reduce or even eliminate the effect of robot application on occupational injuries by strengthening safety regulations. In addition, although local governments are keen on pushing robot application and industrial intelligence, the wide application of robots may impose a burden on the public health expenditure of local governments due to occupational injuries. This study extends our knowledge by challenging the traditional view that robot application can reduce the rate of occupational injuries, and also provides suggestions on the safety regulations of developing countries at the early stage of industrial intelligence.

Public expenditure composition and fiscal decentralization in Brazilian local governments: an analysis through unconditional quantile regression with longitudinal data

Abstract This paper investigates the effect of increasing fiscal decentralization on the composition of public expenditures of Brazilian local governments. The research is innovative, demonstrating that the heterogeneity of expenditure scale influences the correlation between fiscal decentralization and public expenditure of local governments. The sample consisted of unbalanced panel data of 5,565 municipalities for 17 years from 2000 to 2016. The analysis used unconditional quantile regression with panel data. The main findings were: (i) fiscal decentralization affects public expenditure in Brazilian local governments. However, this effect depends on local expenditure scale and fiscal decentralization strategy. For example, the median coefficient was negative in personnel expenditures, and the effect was positive for the third quartile of local governments, when fiscal decentralization was measured by the tax revenue over total revenue. On the other hand, the effects were also positive for median and third quartile regarding intergovernmental transfers per capita like proxy of fiscal decentralization; (ii) the measures (proxies) of fiscal decentralization are correlated with the composition of public expenditure; (iii) in median terms, fiscal decentralization has greater effects on investment expenditures than on current and personnel expenditures; and (iv) in median terms, the tax revenue participation promotes an increase in administrative and planning expenditures instead of expenditures in social functions. Fiscal decentralization measured by intergovernmental transfer per capita has more positive effects on social functions than on legislative and administrative functions.

Are Disasters a Risk to Regional Fiscal Balance? Evidence from Indonesia

Indonesia is an archipelago country and is fairly vulnerable to disasters. While disasters generally affect government revenue and expenditure, their effects likely vary by country. This study examines the effect of disasters on the fiscal balance, revenue, and expenditure of local governments. We used panel data and fixed effects methods to estimate the degree to which disaster severity influences budgetary solvency at the district and provincial levels in Indonesia between 2010 and 2018. This study revealed that disasters can strain fiscal balance at the district and provincial levels due to a decrease in own-source revenue and an increase in social assistance expenditure, capital expenditure, consumption expenditure, and unexpected expenditure. The district expenditure most threatened by disasters is consumption expenditure, while the provincial expenditure most threatened is unexpected expenditure. We also found that an increase in capital expenditure can lead to financial burden due to delays of planned projects or post-disaster reconstruction. Based on these findings, it is clear that some forms of insurance or other financing schemes are necessary to mitigate the adverse impacts of disasters on regional fiscal balance.

ANALISIS FLYPAPER EFFECT TERHADAP BELANJA DAERAH DI KABUPATEN/KOTA BALI DAN NUSA TENGGARA TAHUN 2014-2018

This study aims to analyze the Flypaper Effect on local government expenditure in Bali and Nusa Tenggara in 2014-2018 and to prove whether there is a Flypaper Effect in the region. This study used panel regression analysis with the Eviews 9.0 anaysis tool. The data used in this study are secondary data on the general allocation funds, special allocation funds, profit sharing fund, local government revenue and expenditure of local government for the period of 2014-2018. The results of this study indicate in the regency/municipality of Bali that general allocation funds, special allocation funds and original local government revenue has a positive impact to local government expenditure and Flypaper Effect occurs in districts and municipalities of Bali. while in districts and municipalities of Nusa Tenggara that general allocation funds, special allocation funds, profit sharing funds and original local government revenue has a positive impact to local government expenditure and Flypaper Effect occurs in districts and municipalities of Nusa Tenggara

The Effect of Government Expenditure and Economic Growth on Gender Development Index in Special Region of Yogyakarta Province

The phenomenon of the development inequality between men and women is development problems that still occur in many regions and can be measured using gender development index. This research has purpose to analyze the factors that influence on gender development index in Special Region of Yogyakarta and indentifying variables that has most influence on gender development index in Special Region of Yogyakarta. This research uses gender development index as dependent variable and was implemented in the Province of D.I. Yogyakarta, in contrast to the previous research that already exists. In this research, the author have a hypothesis formulation that all independent variables, government expenditure in education sector, government expenditure in health sector and economic growth has a positive effect on gender development index. This research uses a panel data regression analysis with fixed effect model (FEM) approach. The results of this research indicate that variable of government expenditures in education has a negative and significant effect on gender development index in Province of D.I. Yogyakarta, the variable of government expenditures in health and variable of economic growth has a positive and significant effect on gender development index in Province D.I. Yogyakarta, and the dependent variable has most influence on gender development index in Special Region of Yogyakarta is a government expenditure on health. The implication of this research is the government to pay more attention to ability of each region in realizing the education expenditure, it is neccesary to strengthen cooperaton and equalize of mission both at the province and district/city level to optimize government performance, and need equality on education to reduce education gap in Special Region of Yogyakarta. For expenditure in the health sector, government should increase the percentage of budget allocation for health sector with provision minimum of 10 percent from local government revenue and expenditure budget (APBD) and need performance optimization in financial management so that health budget can be realized optimally as well. Meanwhile in economic growth, the government should to make equalize in the economic growth for each district or city so that can be enjoyed by all level of society. The limitations of this study are use of research data with a limited period and limited information on availability of information on each research variable used

Determinants Comparative Advantage of Non-Oil Export 34 Provinces in Indonesia

In spite of the country’s export activities constantly increase every year, based on the latest report Indonesia still sits at number 28th in the world's top export countries, consider Indonesia as one of the most populated nations and its rich natural resources. There is so much research in the literature about this issue, but to the author’s knowledge, there is still a lack of studies that analyze the performance of non-oil export comparative advantage between provinces in Indonesia instead of between its commodities. The purpose of this research is (1st) to compare non-oil exports comparative advantage between 34 provinces in Indonesia and (2nd) to prove the effect of chosen factors which are a foreign direct investment, local direct investment, inflation, interest rate, exchange rate, population, labor, minimum wage, education, income disparity, regional GDP, government expenditure, and GDP of importing country toward provinces comparative advantage of non-oil export. This research using provinces panel data years 2010-2019. The method of this study is Revealed Comparative Advantage (RCA) index and Trade Balance Index (TBI) to unveil non-oil export comparative advantage between 34 provinces in Indonesia and panel data regression to estimate the impact of determinant factors. The result of comparative advantage index estimation shows that 24 provinces have a comparative advantage based on the RCA index approach and 32 provinces have a comparative advantage based on the TBI approach on non-oil export activities year 2010-2019. The result of panel data regression found that 9 out of 13 determinant variables had a significant effect on the RCA index namely foreign direct investment, local direct investment, exchange rate, population, labor, minimum wage, income disparity, regional GDP, and government expenditure. Then 6 out of 13 determinant variables had a significant effect on TBI which are a local direct investment, interest rate, exchange rate, education, income disparity, and regional GDP.

KAUSALITAS PENERIMAAN, PENGELUARAN DAN PDRB PROVINSI DI INDONESIA 2010 – 2019

This study has three main objectives, namely, first to find out how the causal relationship between local government revenue and local government expenditure in provinces in Indonesia, the second objective is to find out how the causal relationship between local government expenditure and GRDP in provinces in Indonesia. Meanwhile, the third objective is to determine the causal relationship between local government revenue and GRDP in provinces in Indonesia. In this study, the objects in this study are 33 provinces throughout Indonesia. The data used are from 2010 to 2019. The data used are secondary data obtained from the Central Statistics Agency (BPS). The analytical method used is the VAR (Vector Auto Regression) time series analysis and the cluasaility granger test. which is processed using the help of Eviews. Based on the results of hypothesis testing, it shows that: (1) There is no causal relationship between local government revenue and local government expenditure in 33 provinces in Indonesia, but what is formed is a one-way relationship between government revenue and local government expenditure in 33 Indonesian provinces. In the hypothesis testing stage (2) there is no causal relationship between local government spending and GRDP in 33 provinces in Indonesia, in the analysis stage there is no one-way or two-way relationship between government spending and GRDP. Thus the hypothesis is rejected, while the results of hypothesis testing (3) There is no causal relationship between local government revenue and GRDP in 33 provinces in Indonesia. In the analysis stage, there is no one-way or two-way relationship between each variable. Thus the third hypothesis is rejected.

Spatial concentration of local government expenditures on family foster care in Poland

This article presents local government expenditures on family foster care in terms of their spatial concentration. The main aim of the study is to capture regional differences in the financing of family foster care in Poland. The location quotient and the shift-share analysis were applied in the study. The spatial disparities in the functioning of social assistance, in terms of foster family care, in Poland have been detected. These differences are caused by higher revenues for budgets, resulting in major additions to social benefits.

Kausalitas Penerimaan, Pengeluaran dan PDRB Provinsi di Indonesia

This study has three main objectives, namely, first to find out how the causal relationship between local government revenue and local government expenditure in provinces in Indonesia, the second objective is to find out how the causal relationship between local government expenditure and GRDP in provinces in Indonesia. Meanwhile, the third objective is to determine the causal relationship between local government revenue and GRDP in provinces in Indonesia. In this study, the objects in this study are 33 provinces throughout Indonesia. The data used are from 2010 to 2019. The data used are secondary data obtained from the Central Statistics Agency (BPS). The analytical method used is the Granger clauseality test which is processed using Eviews. Based on the results of hypothesis testing, it shows that: (1) There is a reciprocal causal relationship between local government revenues and regional government expenditures in provinces in Indonesia in the western region. Thus the hypothesis is accepted. (2) There is a reciprocal causal relationship between local government revenues and local government expenditures in provinces in Indonesia in the eastern region. Thus the hypothesis is accepted. (3) There is no causal relationship between local government expenditure and GRDP, but there is a relationship between GRDP transfer and expenditure in 33 provinces in Indonesia in the western region. Thus the hypothesis is rejected. (4) There is no causal relationship between local government expenditure and GRDP, but there is a relationship between GRDP transfer and expenditure in provinces in Indonesia in the eastern region. Thus the hypothesis is rejected. (5) There is no causal relationship between GRDP and local government revenues in provinces in western Indonesia. However, there is a one-way relationship between government revenue and GDP. Thus the hypothesis is rejected. (6) There is no causal relationship between GRDP and local government revenues in provinces in eastern Indonesia. However, there is a one-way relationship between government revenue and GDP. Thus the third hypothesis is rejected

Pengaruh Belanja Daerah terhadap Pertumbuhan Ekonomi, IPM, dan Kemiskinan di Kalimantan Selatan

The research aims to determine how local government expenditure on economic growth, HDI, and poverty in South Kalimantan is influenced. This research uses panel data regression analysis, consisting of 13 districts/cities in South Kalimantan during the 2012-2018 periode. The expenditure variable used in this research is the realization of local government expenditure based on function. The result of the study indicates that local government expenditure in education had no significant effect on economic growth, HDI, and poverty. At the same time, the local government expenditure on health has a significant effect on economic growth, HDI, and poverty.

Fiscal Decentralization and Macroeconomic Outcomes in Nigeria

This study examined the fiscal decentralization-economic growth nexus in Nigeria, with the objective of establishing the causal relationship between measures of fiscal decentralization and economic growth covering the period 1981-2019. Employing the autoregressive distributed lag (ARDL) technique of econometrics, the analyses revealed that fiscal decentralization variables employed in the study vis-a-vis federal government, state government and local government expenditures have a positive and significant impact on economic growth in Nigeria except for local government expenditure which was not significant at any level. This behaviour is adduced to be a function of poor governance, corruption and other underlying structural challenges at that level. Also, it was observed that while real GDP has a positive and significant impact on private consumption expenditure, its impact on unemployment was not significant at any level. The study therefore concludes that the nature and pattern of growth in Nigeria has not been inclusive. Consequently, it is recommended that fiscal relations governing the different tiers of government be reviewed to meet existing realities while coordinated fiscal policy measures and improved governance will enhance growth and the fiscal space in the country.

Study on indirect economic impacts and their causes of the 2008 Wenchuan earthquake

In terms of events that undermine economic growth, the impact of natural disasters is huge and inevitable. Taking the 2008 Wenchuan earthquake as the research object, and based on the country-year data for 181 counties in Sichuan Province from 1999 to 2018, this paper uses the dynamic difference-in-difference method to investigate the indirect impact of this event on the economy. The main findings are as follows: Even though the central government has introduced reconstruction policies and invested a lot of reconstruction funds, in 2018, the per capita income in the extremely and relatively severe disaster areas was still significantly lower than the counterfactual by 21.96% and 7.61%, respectively. There is heterogeneity in the long-term indirect impacts in areas with different disaster levels, and the economies of the extremely severe disaster areas may form a "poverty trap," while the economies of the relatively severe disaster areas are still in a slow recovery state. It was further found that the assistance of central government’s reconstruction funds and the increase in local government expenditure are the reasons for the rapid economic recovery in the short term, and the insufficient level of total demand caused by the investment and consumption is the main reasons for the negative indirect impact on the economy in the disaster areas.

In a straightjacket? Targeting deprivation in rural Scotland in the context of localism and austerity

There is a long history of area-based interventions targeted at places seen as being particularly disadvantaged. However, the implementation of such approaches is problematic in rural areas on a number of grounds, including the more dispersed patterns of deprivation and a reliance on high-profile indices of multiple deprivation that are arguably less appropriate in rural contexts. While there is a growing interest in place-based service delivery and localism as a means to tackling geographical inequalities, this sits alongside the pursuit of fiscal austerity by national government that has disproportionately affected local government expenditure. Based on a case study of two largely rural regions in the South of Scotland, this paper explores how deprivation and spatial inequalities are understood and addressed by local government in rural regions, and what evidence is used as a basis for targeting ‘deprived’ areas. The results show that although interventions are targeted at specific areas in a variety of ways, local targeting is broadly undertaken within nationally determined frameworks, and in particular based on those indicators identified by central government as constituting an appropriate evidence base. It is argued that there are fundamental tensions around whether the aim of this type of targeting is to direct resources at specific area-based problems, or whether individuals' residence within particular ‘deprived’ areas is used as a proxy for their likely experience of specific types of deprivation. This ambiguity has particular implications for rural regions, where residence is less closely linked with individual- or household-level deprivation. While there are opportunities for rural authorities to contest the dominance of ‘urban-centric’ indicators, these are limited by central control of resources and the ongoing hollowing out of local government through austerity.

Economies of Scope and Local Government Expenditure: Evidence from Creation of Specially Authorized Cities in Japan

There is little evidence of either the existence or absence of economies of scope in public services provided by general-purpose local governments. This study uses difference-in-differences (DID) analysis and the event study method to estimate the impact on expenditure of the designation of cities as either core cities or special case cities, thereby giving them the authority to undertake a wider range of activities, and identify the magnitude of the economies of scope in local governments using panel data for Japanese municipalities during the period 1996–2015. The findings of this research are summarized as follows. First, in the provision of public services by general-local governments, economies of scope do not occur in the short term (2–3 years), but do appear in the mid to long term (more than 5 years for core city status). After the delegation of duties, per capita expenditure for core cities increases by 2.8% immediately after the designation, but then decreases by 0.6% annually. Second, the wider the range of extra activities delegated, the greater the economies of scope.

Summaries of Articles

Summaries of Articles

Local Fiscal Adjustments From Depopulation: Evidence From The Post–Cold War Defense Contraction

In this paper, we estimate the long-term causal effect of population losses on local government revenue, expenditure, and debt by exploiting a quasi-exogenous change that reduced the number of US m...

Impact of Fiscal Decentralisation on Economic Growth and Poverty Reduction in Aceh Province, Indonesia

This study analyses the impact of fiscal decentralisation policy on economic development and poverty reduction. It focuses on the practice of intergovernmental fiscal transfer and on special autonomy policy in Aceh province, Indonesia, using data from 23 districts gathered from 2008 to 2018. Undertaking a panel data analysis, it will analyse the impact of intergovernmental fiscal transfer from central to local government on local government expenditure. The impact of local government expenditures and fiscal decentralisation practices on local gross domestic product (GDP) and poverty is also measured. The results show that several intergovernmental fiscal transfer policies in Aceh positively enhance the local expenditure. Further, the local government spending and fiscal decentralisation practices in Aceh improve the local GDP and reduce poverty levels in the region.

Voting with your feet or voting for Brexit: The tale of those stuck behind

AbstractThis paper promotes the idea of a culturally‐sensitive Tiebout–Hirschman–Rothschild mechanism underpinning the UK's 2016 Brexit result. Our culture‐based development (CBD) model asserts a trade‐off between two rival types of voting: voting with one's feet or voting in a radical way due to being unable to vote with one's feet, akin to a protest vote. We explore the effects on the Brexit vote of shares of public spending on culture and a particular type of migration dynamic that triggers social closure. Our findings reveal that strong support for the Leave campaign was encountered in areas with lower local government expenditure on culture and in areas with higher outflows of UK residents. Previous literature had found that left‐behind places and places with concentrations of highly educated commuters are the pro‐Brexit nests. Our CBD mechanism of perceived relative deprivation offers a reconciling explanation of these seemingly controversial findings.