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The flypaper effect phenomenon of intergovernmental transfers during the Covid-19:Evidence from Indonesia

Author

Listed:
  • Lela Nurlaela

    (Sekolah Tinggi Ilmu Ekonomi Muhammadiyah Jakarta, Indonesia)

  • Heri Ispriyadi

    (Sekolah Tinggi Ilmu Ekonomi Muhammadiyah Jakarta, Indonesia)

  • Dhika Habibi Zakaira

    (Sekolah Tinggi Ilmu Ekonomi Muhammadiyah Jakarta, Indonesia)

Abstract

This study aims to confirm the flypaper effect phenomenon and the impact of the Covid-19 pandemic on local own-source revenue (LOR), general allocation fund (GAF), and local government financing on local government expenditure in Indonesia. The research used a quantitative method, while the sample was data on regional government budget (RGB) realization in 335 local governments in 2019 – 2020. The data were analyzed using Moderating Regression Analysis. The study found that there was a flypaper effect phenomenon that encouraged the local governments to use GAF, instead of LOR for their local expenditure. The GAF and local government expenditures were higher during the Covid-19 period. To overcome the flypaper effect phenomenon, the central government is advised to improve the GAF policy by setting priorities for its use. Local governments must encourage micro, small, and medium enterprises to help support LOR. This study roves there exists the phenomenon of the flypaper effect in developing countries that implement the presidential system (republic) and provide substantial empirical evidence on government spending policies during crisis and non-crisis (Covid-19).

Suggested Citation

  • Lela Nurlaela & Heri Ispriyadi & Dhika Habibi Zakaira, 2022. "The flypaper effect phenomenon of intergovernmental transfers during the Covid-19:Evidence from Indonesia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 40(2), pages 353-373.
    • Handle: RePEc:rfe:zbefri:v:40:y:2022:i:2:p:353-373
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    flypaper effect; general allocation fund; local government expenditure; local government financing; local own-source revenue;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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