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Analysis of Intergovernmental Transfer Effects on Economic Growth and Regional Income Disparity in West Java Province, Indonesia from 2011 to 2016

Analysis of Intergovernmental Transfer Effects on Economic Growth and Regional Income Disparity in West Java Province, Indonesia from 2011 to 2016
Fahmi Adicipta
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Inggris
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ABSTRACT

The main objective of this study is to determine the effect of intergovernmental transfer which is the main components of fiscal decentralization on economic growth and regional income disparity in West Java Province, Indonesia from 2011 until 2016. This study used panel data analysis with fixed effect regression model.
Intergovernmental transfer contains revenue sharing fund (DBH), general allocation fund (DAU), and specific allocation fund (DAK). The implication of intergovernmental transfer, central government grant tax revenue sharing/non tax revenue sharing for regions is to minimize vertical imbalance between central government and regional government. Natural resources and tax distribution in all regions were not equal. Hence, central government grant general allocation fund for fiscal equalizations and minimize region disparity. Central government also gives specific allocation fund to region which cannot finance it from their own revenues.
The results of this study are: (1) Intergovernmental transfer policy in West Java Province encourages regional economic growth but the value of growth generated is relatively low because it is only seen from the government budget. (2) revenue sharing fund increases the average income disparity of cities and regencies in West Java Province, while general allocation fund for fiscal equalizations is effective in minimizing average income disparity of cities and regencies in West Java Province.
Keywords: Fiscal decentralization, Intergovernmental transfer, Regional economic growth, Regional income disparities