Determinan Kemandirian Keuangan Pemerintah Kabupaten/Kota di Indonesia

Abstract

The fiscal decentralization policy has been implemented in Indonesia for more than two decades. However, its implementation has not successfully reduced local governments' reliance on transfers from the central government, which has contributed to the low level of financial independence among local governments. This study aims to identify and analyze the determinants of fiscal independence in the regions by using a quantitative approach through panel data regression and using inter-regional comparisons covering western, central, and eastern regions in Indonesia during 2016-2021. The panel data regression analysis shows that the effectiveness of Local Revenue (PAD), Human Development Index (HDI), and investment have a positive effect across all regions. Meanwhile, economic growth and population have a significant effect only in the western and eastern regions of Indonesia. Additionally, central government transfer funds significantly affect the western and central regions of Indonesia. Furthermore, capital expenditure and personnel expenditure have significant effects only in the western region of Indonesia. These findings indicate that there are different characteristics that affect financial independence in each region, so that different policy directions are needed to encourage financial independence in each region.