The Impact of Village Funds on Horizontal Fiscal Inequality in South Sumatra Province
Article Sidebar
-
Difference-In-Differences, Horizontal Fiscal Inequality, Theil Entropy Index, Village Fund
Abstract
Research Originality — This study provides novel evidence on the impact of Village Fund transfers on horizontal fiscal inequality in Indonesia. Using a difference-in-differences approach and the Theil entropy index for South Sumatra Province, this research extends existing literature by directly evaluating interregional fiscal inequality over a longer pre- and post-policy period.
Research Objectives — This study aims to examine whether village funds contribute to reducing horizontal fiscal inequality in South Sumatera Province.
Research Methods — This study employs a quantitative difference-in-differences (DiD) approach using secondary data on village funds, area size, human development index, gross regional domestic product growth, poverty rate, local own-source revenue, and intergovernmental transfers, with horizontal fiscal inequality measured by the Theil entropy index. The analysis covers 14 regencies and cities receiving village funds and three regencies and cities not receiving village funds in South Sumatra Province over the 2010–2019 period, distinguishing between pre- and post-village fund implementation.
Empirical Results — The results indicate no significant difference in pre-treatment trends, confirming that the parallel trends assumption in the DiD method is met. The findings of this research suggest that village funds play a crucial role in diminishing horizontal fiscal inequality. Specifically, they contribute towards a reduction in horizontal fiscal inequality in regencies and cities that receive village funds in South Sumatra Province.
Implications — The findings indicate that village funds support the objective of reducing horizontal fiscal inequality, thereby strengthening the role of fiscal decentralization in promoting equitable development across regions.
Full text article
References
Adhitya, B., Badriah, L. S., & Suprapto, S. (2020). Pengaruh pariwisata terhadap ketimpangan pendapatan: Studi kasus Provinsi Daerah Istimewa Yogyakarta. Jurnal Ilmiah Universitas Batanghari Jambi, 20(2), 456. https://doi.org/10.33087/jiubj.v20i2.958
Alhaqi, R. N. (2022). Pengaruh dana desa terhadap perkembangan kemandirian desa di Kecamatan Gantung. Jurnal Bisnis, Manajemen Dan Ekonomi, 3(2). 75-97. https://doi.org/10.47747/jbme.v3i2.739
Arina, A. I. S., Masinambow, V., & Walewangko, E. N. (2021). Pengaruh dana desa dan alokasi dana desa terhadap indeks desa membangun di Kabupaten Minahasa Tenggara. Jurnal Pembangunan Ekonomi Dan Keuangan Daerah, 22(3). 22-41. https://doi.org/10.35794/jpekd.35490.22.3.2021
Bojanic, A. N., & Collins, L. P. A. (2021). Differential effects of decentralization on income inequality: Evidence from developed and developing countries. Empirical Economics, 60(4), 1969–2004. https://doi.org/10.1007/s00181-019-01813-2
Canare, T., Francisco, J. P. S., & Caliso, R. A. C. (2019). Decentralization and income inequality in a panel and cross-section of countries. ASEAN Institute of Management Rizalino S. Navarro Policy Center for Competitiveness, Working Paper 2019-5.
Digdowiseiso, K., Murshed, S. M., & Bergh, S. I. (2022). How effective is fiscal decentralization for inequality reduction in developing countries? Sustainability (Switzerland), 14(1). https://doi.org/10.3390/su14010505
Filippetti, A., & Sacchi, A. (2016). Decentralization and economic growth reconsidered: The role of regional authority. Environment and Planning C: Government and Policy, 34(8), 1793–1824. https://doi.org/10.1177/0263774X16642230?urlappend=%3Futm_source%3Dresearchgate.net%26utm_medium%3Darticle
Fredriksson, A., & Oliveira, G. M. de. (2019). Impact evaluation using difference-in-differences. RAUSP Management Journal, 54(4), 519–532. https://doi.org/10.1108/RAUSP-05-2019-0112
Ginanjar, R. A. F., Sutjipto, H., Suhendra, I., & Anwar, C. J. (2024). A theil decomposition of regional grouping in Indonesia’s human development index. Economics Development Analysis Journal, 13(3), Article 13802. https://doi.org/10.15294/edaj.v13i3.13802
Hadju, I. I., Masinambow, V. A. J., & Maramis, M. Tb. H. (2021). Analisis ketimpangan pembangunan wilayah di Provinsi Sulawesi Utara. Jurnal Berkala Ilmiah Efisiensi, 21(1). 110-120.
Handra, H., Paramitha, A. D., Sirat, C. H., Sulistiono, F., Prananto, H., Imaddudin, I., Affandi, I. M., Calfat, J. A., Mukti, K. P., Mulyono, M., Soedjono, P. I., Prasetya, R. Y., Hadian, Y., & Wiyarto, W. (2022). Analisis kebijakan dampak dana desa terhadap kemiskinan, perekonomian, pengangguran, dan pelayanan publik periode 2015-2019. Kolaborasi Masyarakat Dan Pelayanan Untuk Kesejahteraan (KOMPAK) Kemitraan Pemerintah Australia-Indonesia.
Hasan, K., & Tanesab, M. E. (2021). Pengaruh pendapatan asli desa, dana desa, dan alokasi dana perimbangan desa terhadap belanja desa. Jurnal Manajemen Sains Dan Organisasi, 2(3). 166-178. https://doi.org/10.52300/jmso.v2i3.3632
Khoirunurrofik, Kurniawan, Y. R., & Wiguna, G. E. (2021). Reformulasi dana desa untuk mewujudkan transfer berbasis kinerja: momentum peningkatan peran di masa pandemi. Indonesian Treasury Review, 6(1), 43–56. https://doi.org/10.33105/itrev.v6i1.278
Ministry of Finance. (2022). Peraturan Menteri Keuangan Nomor 201/PMK.07/2022 Tentang Pengelolaan Dana Desa. Kementerian Keuangan.
Paellorisky, M., & Solikin, A. (2019). Village fund reform: A proposal for more equitable allocation formula. Jurnal Bina Praja, 1–13. https://doi.org/10.21787/jbp.11.2019.1-13
Pamukti, S. A., & Bawono, A. D. B. (2022). Pengaruh pendapatan asli daerah, dana alokasi umum, jumlah penduduk miskin, luas wilayah terhadap pertumbuhan ekonomi. Eqien - Jurnal Ekonomi Dan Bisnis, 10(1). 370-375. https://doi.org/10.34308/eqien.v10i1.550
Pandiangan, A. G., Priyarsono, D. S., & Probokawuryan, M. (2021). Impact of village funds on the gap the human development index in rural-city areas in Indonesia. Jurnal Ekonomi Dan Kebijakan Pembangunan, 10(2), 134–153. https://doi.org/10.29244/jekp.10.2.2021.134-153
Pemerintah Republik Indonesia. (2022). Undang-Undang Nomor 1 Tahun 2022 Tentang Hubungan Keuangan Antara Pemerintah Pusat Dengan Pemerintah Daerah.
Pietrovito, F., Pozzolo, A. F., Resce, G., & Scialà, A. (2023). Fiscal decentralization and income (re)distribution in OECD countries’ regions. Structural Change and Economic Dynamics, 67, 69–81. https://doi.org/10.1016/j.strueco.2023.07.002
Prasetyo, T. A., & Dinarjito, A. (2021). Analisis pengaruh dana desa dan indeks pembangunan manusia per kabupaten terhadap produk domestik regional bruto di Indonesia dengan pembagian wilayah sebagai variabel kontrol. Indonesian Treasury Review, 6(4). 375–391. https://doi.org/10.33105/itrev.v6i4.336
Purwaningsih, F., Zumaeroh, Z., Purnomo, S. D., Adhitya, B., Retnowati, D., Winarto, H., & Kencana. Heris. (2022). Pengaruh pengelolaan alokasi dana desa terhadap indikator ekonomi di Provinsi Jawa Tengah. Midyear National Conference, 803–820.
Rimawan, M., & Aryani, F. (2019). Alokasi dana desa (ADD) terhadap pertumbuhan ekonomi, indeks pembangunan manusia serta kemiskinan pada Kabupaten Bima. Seminar Nasional Taman Siswa Bima Tahun. http://semnas.tsb.ac.id/index.php/semnastsb2019/index.
Roth, J., Sant’Anna, P. H. C., Bilinski, A., & Poe, J. (2023). What’s trending in difference-in-differences? A synthesis of the recent econometrics’ literature. Journal of Econometrics, 235(2), 2218–2244. https://doi.org/10.1016/j.jeconom.2023.03.008
Saggaf, A., Nawawi, Z., A. Muslim, Marwa, T., Azwardi, A., Mukhtaruddin, M., Sukanto, S., Marissa, F., Kalsum, U., Thamrin, K. M. H., Pratama, D., Bashir, A., & Hamidi, I. (2018). Data dan informasi manfaat dana desa di Provinsi Sumatera Selatan. Badan Penelitian Dan Pengembangan, Pendidikan Dan Pelatihan, Dan Informasi Kemendes PDTT Dan Universitas Sriwijaya.
Sasabuchi, Y. (2021). Introduction to difference-in-differences design. Annals of Clinical Epidemiology, 3(3), 74–77. https://doi.org/10.37737/ace.3.3_74
Schwerdt, G., & Woessmann, L. (2020). Empirical methods in the economics of education. In The Economics of Education: A Comprehensive Overview (pp. 3–20). Elsevier. https://doi.org/10.1016/B978-0-12-815391-8.00001-X
Sigit, T. A., & Kosasih, A. (2020). Pengaruh dana desa terhadap kemiskinan: Studi tingkat kabupaten/kota di Indonesia. Indonesian Treasury Review, 5(2), 105–119. https://doi.org/10.33105/itrev.v5i2.170
Stossberg, S., Bartolini, D., & Blöchliger, H. (2016). Fiscal decentralisation and income inequality. OECD Economics Department Working Papers, 1331. https://doi.org/10.1787/5jlpq7tm05r6-en
Stossberg, S., & Blöchliger, H. (2017). Fiscal decentralisation and income inequality: Empirical evidence from OECD countries. Jahrbücher für Nationalökonomie und Statistik / Journal of Economics and Statistics, 237(3), 225–273. https://doi.org/10.1515/jbnst-2017-1108?urlappend=%3Futm_source%3Dresearchgate.net%26utm_medium%3Darticle
Statistics Indonesia. (2021). Perhitungan dan analisis kemiskinan makro Indonesia tahun 2021.
Statistics Indonesia. (2024a). Indeks pembangunan manusia 2023.
Statistics Indonesia. (2024b). Produk domestik regional bruto provinsi-provinsi di Indonesia menurut pengeluaran 2019-2023.
Statistics Indonesia South Sumatra Province. (2023). Ketimpangan pembangunan antar kabupaten/kota di Provinsi Sumatera Selatan.
Suyanto. (2017). Kajian ketimpangan fiskal (fiscal imbalance) dan kebijakan desentralisasi fiskal pada daerah otonom. Jurnal Unitomo. 1(1). 1-21. https://doi.org/10.25139/dev.v1i1.70
Wasudewa, A. A. N. G., & Iskandar, D. A. (2023). Dampak dana desa terhadap pertumbuhan dan perkembangan ekonomi regional di Indonesia. Journal of Regional and Rural Development Planning, 7(2), 138–150. https://doi.org/10.29244/jp2wd.2023.7.2.138-150
Wong, S. W., Tang, B. S., Liu, J., Liang, M., & Ho, W. K. O. (2021). From “decentralization of governance” to “governance of decentralization”: Reassessing income inequality in Periurban China. Environment and Planning A, 53(6), 1473–1489. https://doi.org/10.1177/0308518X20988013
Authors
Copyright (c) 2025 Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright notice can be accessed here