The Analysis of relationship between intergovernmental transfer and regional development in Indonesia

Abstract

The main purpose of this study is to analyze relationship between intergovernmental transfer and regional development in Indonesia. This is important to do since during last six years, the amount of money transferred to local governments under transfer scheme has considerably increased. This study is also considered could fill the research gap, in which the studies of this intergovernmental issue are mainly focusing on general situation. Then, for this purpose, data from municipalities and regencies during six years period (2013-2018) are taken as main sample. In addition, this study uses generalized least square as main estimation model. The variables of this study are intergovernmental transfer as main independent variable, annual economic growth as main dependent variable, while other factors such as local’s economic activities, local’s employment, local income, education, investment rate and infrastructure are taken as control. The regression result implies that the intergovernmental transfer along with its two detailed scheme types (special allocation fund and shared-revenue fund) are statistically significant and negatively associated with local economic growth. The regression results also reflect that there are several related variable do statistically significant and associated to local economic growth. While other variable do not so.