The Impact Of Fiscal Decentralization And State Allocative Efficiency On Regional Growth In Indonesia
AbstractThis paper provides a new empirical analysis on the effects of fiscal decentralization on economic growth with the inclusion of a state allocative efficiency factor in the growth model. Using Indonesia as a case study, this study aims to reveal whether the state allocative efficiency will impact growth through better allocation of public goods. Following a two-stage empirical method, the expenditure efficiency of Indonesia's 26 state governments over a 10-year period (1996–2005) is constructed by using Data Envelopment Analysis (DEA) and a panel data regression is utilized in the growth model. The results indicate that although fiscal decentralization provided a greater incentive structure for state governments to become more efficient in allocating fiscal resources, it did not always lead to robust growth due to rising regional disparities particularly in the level of development and resource capacities.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal Journal of International Commerce, Economics and Policy.
Volume (Year): 01 (2010)
Issue (Month): 02 ()
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Find related papers by JEL classification:
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
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