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Use of Public Funds and the Flypaper Effect; Analysis of Regional Expenditure in Four Indonesian Provinces

In: Proceedings of the 8th Global Conference on Business, Management, and Entrepreneurship (GCBME 2023)

Author

Listed:
  • Nanang Rusliana

    (Siliwangi University)

  • Dyah Ciptaning Lokiteswara Setya Wardhani

    (STIE Latifah Mubarokiyah)

  • Raisa Hillia Aini Syifa

    (Cipasung University)

Abstract

This study aims to analyze the use of public funds and the impact of the Flypaper Effect on regional spending in Indonesia’s four newly expanded provinces. The Flypaper Effect refers to the phenomenon where transfers of funds from central government to regions tend to be higher than the amount that should be received based on local conditions. This study involves four newly created provinces, namely West Papua, Gorontalo, North Maluku, and West Sulawesi. The research analyzed secondary data collected from various sources related to regional spending and transfers of central government funds. The analytical approaches used were panel regression and other statistical tests to identify the relationship between the use of public funds and the Flypaper Effect in the four provinces. The results showed Flypaper Effect phenomenon only occurred in the West Papua and Gorontalo Provinces. Meanwhile, in North Maluku and West Sulawesi, the Flypaper Effect phenomenon did not occur. This research provides important insights regarding public fund management policies and budget allocations at the regional level. The government needs to improve the fund transfer system and strengthen regional capacity in managing public finances can be important steps to reduce the dependence of provinces on funds from the central government.

Suggested Citation

  • Nanang Rusliana & Dyah Ciptaning Lokiteswara Setya Wardhani & Raisa Hillia Aini Syifa, 2024. "Use of Public Funds and the Flypaper Effect; Analysis of Regional Expenditure in Four Indonesian Provinces," Advances in Economics, Business and Management Research, in: Ratih Hurriyati & Lili Adi Wibowo & Sulastri Sulastri & Lisnawati Lisnawati (ed.), Proceedings of the 8th Global Conference on Business, Management, and Entrepreneurship (GCBME 2023), pages 200-208, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-443-3_29
    DOI: 10.2991/978-94-6463-443-3_29
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