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Spillover Effects and Political Yardstick Competition in Local Public Spending in Indonesia

Author

Listed:
  • Muhammad Reyhan Akbar

    (Department of Economics, Faculty of Economics and Business, Padjadjaran University, West Java, Indonesia)

  • Bagdja Muljarijadi

    (Department of Economics, Faculty of Economics and Business, Padjadjaran University, West Java, Indonesia)

Abstract

This study aims to test the presence of spillover effects and political yardstick competition in both mandatory and discretionary spending among local governments in Indonesia. A spatial econometrics model was employed to evaluate data from 410 districts/municipalities in Indonesia from 2010 to 2018. The findings confirm spillover effects in spending decisions among local governments. The empirical analysis also reveals that political factors drive horizontal interactions in mandatory spending, while such influences are absent in discretionary spending.

Suggested Citation

  • Muhammad Reyhan Akbar & Bagdja Muljarijadi, 2024. "Spillover Effects and Political Yardstick Competition in Local Public Spending in Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 70, pages 97-112, December.
    • Handle: RePEc:lpe:efijnl:202407
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    References listed on IDEAS

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    1. Agnese Sacchi & Simone Salotti, 2016. "A Comprehensive Analysis of Expenditure Decentralization and of the Composition of Local Public Spending," Regional Studies, Taylor & Francis Journals, vol. 50(1), pages 93-109, January.
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    4. Tengku Munawar Chalil, 2020. "Fiscal competitions among Indonesian municipalities: a spatial econometric analysis," Asia-Pacific Journal of Regional Science, Springer, vol. 4(1), pages 241-260, February.
    5. Thushyanthan Baskaran, 2020. "Fiscal interactions in the short and the long run: evidence from German reunification [The tax gradient: spatial aspects of fiscal competition]," Journal of Economic Geography, Oxford University Press, vol. 20(3), pages 711-732.
    6. Kelejian, Harry H & Prucha, Ingmar R, 1998. "A Generalized Spatial Two-Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 99-121, July.
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    More about this item

    Keywords

    local government spending; spillover effects; political yardstick competition;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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