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Fiscal Decentralization, Regional Income Inequality, and the Provision of Local Public Goods: Evidence from Indonesia

Matondang Elsa Siburian
경제연구소 (Hanyang Economic Research Institute)|2021.12|Journal of Economic Development|제46권 제4호|pp. 87-103|DOI 10.35866/caujed.2021.46.4.004

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참고문헌

키워드

IndonesiaRegional InequalityFiscal DecentralizationSimultaneous Equation ModelLocal Public Goods
주제분류경제학

초록

The objective of this paper is to clarify the potential joint determination between fiscal decentralization, regional inequality, and the provision of local public goods in Indonesia. Using provincial-level data over the period 2001-2014, we estimate the simultaneous equation model (SEM) to circumvent the possibility of interdependence between the interest variables. The result reveals that fiscal decentralization is associated with lower regional income disparity but not vice versa. The result confirms that regional income inequality and the provision of public goods are simultaneously determined. The result provides no evidence of interdependence between fiscal decentralization and the provision of local public goods.

Abstract

The objective of this paper is to clarify the potential joint determination between fiscal decentralization, regional inequality, and the provision of local public goods in Indonesia. Using provincial-level data over the period 2001-2014, we estimate the simultaneous equation model (SEM) to circumvent the possibility of interdependence between the interest variables. The result reveals that fiscal decentralization is associated with lower regional income disparity but not vice versa. The result confirms that regional income inequality and the provision of public goods are simultaneously determined. The result provides no evidence of interdependence between fiscal decentralization and the provision of local public goods.

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