Degree of Fiscal Decentralization and Flypaper Effect: Evidence from Indonesia

2017 ◽  
Vol 23 (9) ◽  
pp. 9013-9019
Author(s):  
Baldric Siregar ◽  
Rudy Badrudin
Keyword(s):  
Fiscal Decentralization ◽  
Flypaper Effect

scholarly journals APAKAH FLYPAPER EFFECT TERJADI DI ACEH? STUDI MENGUKUR KEMANDIRIAN KEUANGAN DAERAH

2020 ◽  
Vol 3 (4) ◽  
Author(s):  
Muhammad Hasan Basri
Keyword(s):  
Fiscal Decentralization ◽  
Descriptive Analysis ◽  
Economic Structure ◽  
Revenue Sharing ◽  
National Government ◽  
Least Square ◽  
Flypaper Effect ◽  
Positive Relation ◽  
Tertiary Sector ◽  
Domestic Products

The objective of this study is to analyse the phenomenon of flypaper effect in Aceh after the implementation of fiscal decentralization. Data used in the study were panel data covering all 23 district/municipalities in Aceh from 2011 to 2013. Pooled Least Square was utilized. The results of this study revealed that ownsource revenue, sharing revenue, special allocation funds, general allocation funds, and special autonomy funds are statistically significant variables and have a positive relation to regional spending. It was proven that flypaper effect has occured in Aceh as the coefficient of the own-source revenue variabel was smaller than that of sharing revenue variabel. This implied that Aceh has been dependent on the national government in term of regional financing. Based on descriptive analysis, provinces having dominant share of tertiary sector to their regional gross domestic products show fiscally independent. In order to achieve fiscal independence, the phenomenon of flypaper effect could be overcomed by shifting the economic structure from the primary and secondary to the tertiary sectors of the economy. In doing so, the contribution of own-source revenue to regional spending outweigh intergovernment transfer funds from national government.

scholarly journals The Flypaper Effect Phenomenon: Evidence from Indonesia

2018 ◽  
Vol 2 (1) ◽  
pp. 21
Author(s):  
Ansharullah Tasri
Keyword(s):  
Panel Data ◽  
Local Government ◽  
Central Government ◽  
Fiscal Decentralization ◽  
Government Expenditure ◽  
Provincial Government ◽  
Least Square ◽  
Flypaper Effect ◽  
Decentralization Policy ◽  
Local Government Expenditure

One of the implementations of autonomy policy is fiscal decentralization. The State gives chance to every local government for improving its fiscal ability. Original Local Government Revenue (PAD) is fiscal potency owned local government to improve local government independence to promote welfare to society. To accelerate fiscal independence of local government equally, the central government sends transfer funds in the form of General Allocation Funds (DAU) which aims to comply local government expenditure that has not fulfilled. However, problems faced is local government expenditure management still much more affected by DAU rather than PAD. It indicates that local government still depends on central government to comply expenditure called flypaper effect. This research aims to analyze the effect of PAD and DAU on local government expenditure by identifying whether occurs flypaper on provincial government in Indonesia. The method used in this research is analysis regression of panel data with Generalized Least Square (GLS). Data used is panel data from 34 provinces in Indonesia between 2008-2017. Based on results estimation, PAD and DAU positively and significantly affect local government expenditure. However, the DAU more affects local government expenditure compared with PAD. This exhibits that flypaper effect phenomenon occurred on provincial government in Indonesia which local government expenditure response more affected by DAU than PAD. It is happening due to the provincial government still relies on central government to comply its expenditure illustrated with high DAU transfers. This research concludes that decentralization policy in Indonesia is not effective yet. Thus, the government needs to adjust decentralization policy in order to improve regional fiscal independence.

scholarly journals The Flypaper Effect Phenomenon: Evidence from Indonesia

2018 ◽  
Vol 2 (1) ◽  
pp. 20
Author(s):  
Ansharullah Tasri
Keyword(s):  
Panel Data ◽  
Local Government ◽  
Central Government ◽  
Fiscal Decentralization ◽  
Government Expenditure ◽  
Provincial Government ◽  
Least Square ◽  
Flypaper Effect ◽  
Decentralization Policy ◽  
Local Government Expenditure

One of the implementations of autonomy policy is fiscal decentralization. The State gives chance to every local government for improving its fiscal ability. Original Local Government Revenue (PAD) is fiscal potency owned local government to improve local government independence to promote welfare to society. To accelerate fiscal independence of local government equally, the central government sends transfer funds in the form of General Allocation Funds (DAU) which aims to comply local government expenditure that has not fulfilled. However, problems faced is local government expenditure management still much more affected by DAU rather than PAD. It indicates that local government still depends on central government to comply expenditure called flypaper effect. This research aims to analyze the effect of PAD and DAU on local government expenditure by identifying whether occurs flypaper on provincial government in Indonesia. The method used in this research is analysis regression of panel data with Generalized Least Square (GLS). Data used is panel data from 34 provinces in Indonesia between 2008-2017. Based on results estimation, PAD and DAU positively and significantly affect local government expenditure. However, the DAU more affects local government expenditure compared with PAD. This exhibits that flypaper effect phenomenon occurred on provincial government in Indonesia which local government expenditure response more affected by DAU than PAD. It is happening due to the provincial government still relies on central government to comply its expenditure illustrated with high DAU transfers. This research concludes that decentralization policy in Indonesia is not effective yet. Thus, the government needs to adjust decentralization policy in order to improve regional fiscal independence.

scholarly journals Pengaruh Transfer Pemerintah Pusat terhadap Perilaku Fiskal Pemerintah Daerah di Provinsi Kalimantan Timur

2011 ◽  
Vol 12 (1) ◽  
pp. 56-71
Author(s):  
Erny Murniasih ◽  
M. Syarif Mulyadi
Keyword(s):  
Local Government ◽  
Fiscal Decentralization ◽  
Least Square Method ◽  
Local Economy ◽  
Least Square ◽  
Block Grant ◽  
Flypaper Effect ◽  
Fiscal Transfers ◽  
East Kalimantan ◽  
The Impact

Over the last decade of Indonesia's fiscal decentralization era, the amount of intergovernmental fiscal transfers has increased substantially. The increase of intergovernmental fiscal transfers is expected to reduce the burden of local economy without sacrificing the quality of public service. This study aims to investigate whether the block grant transfer affect the spending behavior of local government. Using Pool Least Square method and taking East Kalimantan Province as case study, this study found the existance of flypaper effect. This finding emphasize the view of any increase in block grant of transfer will only induce higher spending. Therefore, in order to achieve the independency of local government as the objective of decentralization, some efforts should be taken to minimize the impact of flypaper effect.

scholarly journals The Analysis of Regional Expenditure Responses to Block Grants Transfer from Central Government

2021 ◽  
Vol 3 (1) ◽  
pp. 39-55
Author(s):  
Ahmad Nawawi
Keyword(s):  
Panel Data ◽  
Central Government ◽  
Fiscal Decentralization ◽  
Block Grant ◽  
Flypaper Effect ◽  
West Java ◽  
Block Grants ◽  
Central Java ◽  
The Future ◽  
Regional Governments

The implementation of fiscal decentralization in Indonesia is exactly two decades in year 2021, during this time the policies in the field of transfers to regions have developed with a significant increase in the budget. The budget increasing of transfer to regions is expected to increase the region in providing services to the community and increase development. Furthermore, the objectives of fiscal decentralization are to reduce fiscal gaps and encourage regional governments to be more independent. This study aims to determine the response or behavior of regional spending to transfer funds (block grants) from the central government. The research locus are all districts/cities in West Java, Central Java, and East Java Provinces and used a panel data equation, with variables are regional expenditure, general allocation fund (DAU), sharing allocation fund (DBH), and local revenues (PAD). The results showed that the block grant in the form of DAU encouraged an increase in regional spending. Meanwhile, DBH does not cause a flypaper effect. In the future, in order to achieve the region’s independence, the influence of the flypaper effect from the DAU should be minimized, and the exploration of potential regional revenues needs to be optimized.

scholarly journals FLYPAPER EFFECT THEORY DALAM IMPLEMENTASI KEBIJAKAN DESENTRALISASI FISKAL

2015 ◽  
Vol 11 (1) ◽  
pp. 69
Author(s):  
Suyanto Suyanto
Keyword(s):  
Central Government ◽  
Fiscal Decentralization ◽  
Flypaper Effect ◽  
Effect Theory ◽  
Decentralization Policy ◽  
Fiscal Imbalance ◽  
Vertical Fiscal Imbalance ◽  
The Impact ◽  
Financial Transfer ◽  
Regional Governments

Fiscal decentralization can be considered as intergovernmental financial assistance within a state. This assistance is commonly called intergovernmental financial transfer that is transfer of fund from a level of government to another level. Generally, the transfer is usually occurred from a higher level of government the lower counterpart of a single state. The re- search is conducted to prove that Flypaper Effect has occurred in fiscal decentralization policy. The research finds that regional governments use the transfer for increasing their expenditures without raising the tax. The impact which is occurred from correlation of financial transfer by central government toward the income and expenditure of regional governments shows flypaper effect indication in the implementation of fiscal decentralization. In that case, the effect to the increase in regional expenditure is bigger than the effect toward its income. This is showing that transfer of the fund has caused the increase in vertical fiscal imbalance. Transfer of funds encourages the increase in the expenditure of autonomous regions.

scholarly journals The Flypaper Effect Phenomenon: Evidence from Indonesia

2018 ◽  
Vol 2 (1) ◽  
pp. 21-26
Author(s):  
Ansharullah Tasri
Keyword(s):  
Panel Data ◽  
Local Government ◽  
Central Government ◽  
Fiscal Decentralization ◽  
Government Expenditure ◽  
Provincial Government ◽  
Least Square ◽  
Flypaper Effect ◽  
Decentralization Policy ◽  
Local Government Expenditure

Abstract One of the implementations of autonomy policy is fiscal decentralization. The State gives chance to every local government for improving its fiscal ability. Original Local Government Revenue (PAD) is fiscal potency owned local government to improve local government independence to promote welfare to society. To accelerate fiscal independence of local government equally, the central government sends transfer funds in the form of General Allocation Funds (DAU) which aims to comply local government expenditure that has not fulfilled. However, problems faced is local government expenditure management still much more affected by DAU rather than PAD. It indicates that local government still depends on central government to comply expenditure called flypaper effect. This research aims to analyze the effect of PAD and DAU on local government expenditure by identifying whether occurs flypaper on provincial government in Indonesia. The method used in this research is analysis regression of panel data with Generalized Least Square (GLS). Data used is panel data from 34 provinces in Indonesia between 2008-2017. Based on results estimation, PAD and DAU positively and significantly affect local government expenditure. However, the DAU more affects local government expenditure compared with PAD. This exhibits that flypaper effect phenomenon occurred on provincial government in Indonesia which local government expenditure response more affected by DAU than PAD. It is happening due to the provincial government still relies on central government to comply its expenditure illustrated with high DAU transfers. This research concludes that decentralization policy in Indonesia is not effective yet. Thus, the government needs to adjust decentralization policy in order to improve regional fiscal independence.

scholarly journals The Effects of Fiscal Decentralization on General and Local Government Size: Does Composite Index Matter?

2021 ◽  
pp. 5-23
Author(s):  
Ebru CANIKALP ◽  
Taner TURAN ◽  
İlter ÜNLÜKAPLAN
Keyword(s):  
Local Government ◽  
Local Governments ◽  
Positive Relationship ◽  
Fiscal Decentralization ◽  
Composite Index ◽  
Government Size ◽  
Flypaper Effect ◽  
General Government ◽  
Using Data ◽  
The Impact

This article examines the impact of fiscal decentralization on the size of both general and local government using data for 36 countries over the period 1972–2019 and GMM. Our results consistently suggest that fiscal decentralization does not exert a significant impact on general government size. On the other hand, there exists a positive relationship between fiscal decentralization and local government size. We should note that our baseline regression results don’t significantly change when we use different fiscal decentralization indexes. Therefore, we don’t find any evidence for the argument that fiscal decentralization would be helpful to restrict the expansion of government size. Moreover, we present some evidence for the flypaper effect. Additionally, we find a positive relationship between the fiscal importance and local governments, interpreted as an indicator of expenditure competition instead of race to bottom.

Fiscal Decentralization in Transition Economies

2004 ◽  
pp. 126-141
Author(s):  
A. Chernyavsky ◽  
K. Vartapetov
Keyword(s):  
Public Finance ◽  
Transition Economies ◽  
Local Governments ◽  
Fiscal Decentralization ◽  
Government Control ◽  
Finance Reform ◽  
Fiscal Transfers ◽  
Fiscal Autonomy ◽  
Subnational Government ◽  
Tax Autonomy

By employing the methodology developed by the OECD the paper assesses the degree of revenue decentralization in Russia in comparison with other post-communist European countries. The paper provides theoretical arguments underpinning fiscal decentralization, analyzes the composition of subnational government revenues, the level of regional and local tax autonomy and types of intergovernmental fiscal transfers. The analysis presents the composition of revenues depending on the degree of subnational and local government control. In comparison with other transition countries fiscal decentralization in Russia is relatively low. It is concluded that Russia's public finance reform has not progressed towards providing greater fiscal autonomy for regional and local governments.

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