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The Impact of Government Budget shifts to Regional Disparities in Indonesia: Before and After Decentralisation


  • Aritenang, Adiwan F.


Since its independence, Indonesia has experience a rapid and uneven economic growth. The financial crisis in 1998 has led Indonesia to decentralisation with a new political and government budget order in 2001. Researches found that the local government’s main expenditure are on routine spending, such as wage and asset maintenance, not on the development spending. Using macroeconomic data from 1993 to 2005, this paper aims to overview the inequality in Indonesia regions before and after the decentralisation. The paper deploy a set of data on inter government fiscal transfer, expenditure rate, and the level of revenue as a proxy variables to understand the effect to inequality. In this paper we will overview the level of disparities by using various methods and also the shifts of regional inequality over time. It is suggested that inequality level is still severe and convergence rate has decrease throughout the decentralisation era. Impacts from inequality can be detected although weak and fluctuated over time.

Suggested Citation

  • Aritenang, Adiwan F., 2009. "The Impact of Government Budget shifts to Regional Disparities in Indonesia: Before and After Decentralisation," MPRA Paper 25243, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:25243

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    References listed on IDEAS

    1. Anne Booth, 2005. "The evolving role of the central government in economic planning and policy making in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(2), pages 197-219.
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    More about this item


    Indonesia; Decentralisation; Government Budget; Disparities; Local Revenue;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics


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