The Phenomenon of Flypaper Effect on Fiscal Transfer and Regional Expenditure in Regencies/Cities of West Papua Province in 2017–2021
Keywords:
Regional Shopping, Special Allocation Fund, General Allocation Funds, Flypaper Effect, Regional Original RevenueAbstract
This study aims to analyze the influence of Regional Original Revenue (PAD), General Allocation Fund (DAU), Special Allocation Fund (DAK), and Revenue Sharing Fund (DBH) on Regional Expenditure and identify the phenomenon of flypaper effect in districts/cities in West Papua Province for the 2017–2021 period. The data used is secondary data obtained from the Directorate General of Financial Balance and the Central Statistics Agency. The analysis method employed is panel data regression, with model selection conducted through the Chow test and the Hausman test, which yields the Fixed Effects Model (FEM) as the best model. The results of the study show that PAD, DAU, and DBH do not have a significant effect on Regional Expenditure, while DAK has a considerable impact. These findings indicate a flypaper effect, where local governments are more responsive to fiscal transfers than to Regional Original Revenue. This condition reflects the fiscal dependence of local governments on central funds, so a strategy to increase PAD is needed to strengthen regional financial independence
References
Aguade, A. E., Ayanaw, D., & Derso, E. A. (2022). Panel data analysis of profitability and employment growth of medium and large-sized industries in Ethiopia. Hell, 8(10), e10859. https://doi.org/10.1016/j.heliyon.2022.e10859
Al-Shammari, M., Doty, H., & Banerjee, S. (2021). The Interplay of CEO Ability and Governance Robustness on the Performance Effects of Corporate Social Responsibility. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3889976
Anley Alebachew, T. (2020). Determinates of Capital Structure in the Case of Private Commercial Banks in Ethiopia. Journal of Finance and Accounting, 8(5), 227. https://doi.org/10.11648/j.jfa.20200805.13
Arends, H. (2020). The decentralization of death? Local budgets and organised crime violence. Journal of Public Policy. https://doi.org/10.1017/S0143814X20000239
Bahasoan, A. N., Anwar, C., Khaldun, R. I., & Tahawa, T. H. B. (2019). The Influence of Economic Growth on Manpower Absorption in Central Sulawesi. IOP Conference Series: Earth and Environmental Science, 343(1), 012253. https://doi.org/10.1088/1755-1315/343/1/012253
Choudhury, A., & Sahu, S. (2022). Revisiting the nexus between fiscal decentralization and government size - The role of ethnic fragmentation. European Journal of Political Economy, 75, 102193. https://doi.org/10.1016/j.ejpoleco.2022.102193
De Medeiros Silva, W. K., de Freitas, G. P., Coelho Junior, L. M., de Almeida Pinto, P. A. L., & Abrahão, R. (2019). Effects of climate change on sugarcane production in the state of Paraíba (Brazil): a panel data approach (1990–2015). Climatic Change, 154(1–2), 195–209. https://doi.org/10.1007/s10584-019-02424-7
Digdowiseiso, K., Murshed, S. M., & Bergh, S. I. (2022). How Effective Is Fiscal Decentralization for Inequality Reduction in Developing Countries? Sustainability, 14(1), 505. https://doi.org/10.3390/su14010505
Dinh Thanh, S., Nguyen, C. P., Duy-tung, B., Binh, N. Q., & Van, D. T. B. (2023). Spatial Spillover Effects of Fiscal Decentralization on Governance and Public Administration Quality, Regional Studies, 57(3), 478–496. https://doi.org/10.1080/00343404.2022.2078801
Fan, F., Li, M., Tao, R., & Yang, D. (2020). Transfer-based decentralization, economic growth, and spatial inequality: Evidence from China's 2002–2003 tax sharing reform. Urban Studies, 57(4), 806–826. https://doi.org/10.1177/0042098019856780
Foa, R. S. (2022). Decentralization, Historical State Capacity, and the Provision of Public Goods in Post-Soviet Russia. World Development, 152, 105807. https://doi.org/10.1016/j.worlddev.2021.105807
Hamaker, E. L., & Muthén, B. (2020). The Fixed Versus Random Effects Debate and Its Relation to Centering in Multilevel Modeling. Psychological Methods, 25(3), 365–379. https://doi.org/10.1037/met0000239
Hong Vo, D., Nguyen, T., Ha, D. T.-T., & Tran, N. P. (2021). The Disparity of Revenue and Expenditure among Subnational Governments in Vietnam. Emerging Markets Finance and Trade, 57(1), 163–174. https://doi.org/10.1080/1540496X.2019.1605896
Hörcher, D., De Borger, B., & Graham, D. J. (2023). Subsidised transport services in a fiscal federation: Why local governments may be against decentralised service provision. Economics of Transportation, 34, 100312. https://doi.org/10.1016/j.ecotra.2023.100312
Huang, B., Lee, T.-H., & Ullah, A. (2019). A combined random effect and fixed effect forecast for panel data models. Journal of Management Science and Engineering, 4(1), 28–44. https://doi.org/10.1016/j.jmse.2019.03.004
Kim, S., Lee, Y., & Kim, T. (2022). The Relationship between Fiscal Decentralization and Trust in Government: Evidence from the South Korean Case. International Review of Administrative Sciences, 88(2), 373–389. https://doi.org/10.1177/0020852320933325
Lewis, B. D. (2023). Indonesia's New Fiscal Decentralisation Law: A Critical Assessment. Bulletin of Indonesian Economic Studies, 59(1), 1–28. https://doi.org/10.1080/00074918.2023.2180838
Lewis, B. D., Nguyen, H. T. M., & Hendrawan, A. (2020). Political accountability and public service delivery in decentralized Indonesia: Incumbency advantage and the performance of second-term mayors. European Journal of Political Economy, 64, 101910. https://doi.org/10.1016/j.ejpoleco.2020.101910
Li, J., & Ding, R. (2022). Financial Decentralization and Environmental Pollution Research. Sustainability. https://doi.org/10.3390/su14137576
Li, Y., & Bai, L. (2024). Analyzing Green Growth Efficiency in China and Investigating the Spatial Effects of Fiscal Decentralization: Case Study of Prefecture-Level Cities. Sustainability, 16(8), 3408. https://doi.org/10.3390/su16083408
Papke, L. E., & Wooldridge, J. M. (2023). A simple, robust test for choosing the level of fixed effects in linear panel data models. Empirical Economics, 64(6), 2683–2701. https://doi.org/10.1007/s00181-022-02337-y
Pietrovito, F., Pozzolo, A. F., Resce, G., & Scialà, A. (2023). Fiscal decentralization and income (re)distribution in regions of OECD countries. Structural Change and Economic Dynamics, 67, 69–81. https://doi.org/10.1016/j.strueco.2023.07.002
Purbadharmaja, I. B. P., Maryunani, Ananda, C. F., & Santoso, D. B. (2019). The implications of fiscal decentralization and budget governance on economic capacity and community welfare. Foresight, 21(2), 227–249. https://doi.org/10.1108/FS-05-2018-0052
Rotulo, A., Paraskevopoulou, C., & Kondilis, E. (2021). The Effects of Health Sector Fiscal Decentralization on Availability, Accessibility, and Utilisation of Healthcare Services: A Panel Data Analysis. International Journal of Health Policy and Management. https://doi.org/10.34172/ijhpm.2021.163
Singh, R., Bhattacharjee, S., & Nandy, A. (2024). Fiscal decentralization for the delivery of health and education in Indian states: An ongoing process is more desirable than a policy shift. Journal of Policy Modeling, 46(2), 254–271. https://doi.org/10.1016/j.jpolmod.2024.01.006
Sun, Y., & Wang, X. (2022). An asymptotically F-distributed Chow test in the presence of heteroscedasticity and autocorrelation. Econometric Reviews, 41(2), 177–206. https://doi.org/10.1080/07474938.2021.1874703
Thanh, S. D., Nguyen, C., Duy-tung, B., Binh, N. Q., & Van, D. T. B. (2022). Spatial Spillover Effects of Fiscal Decentralization on Governance and Public Administration Quality, Regional Studies, 57, 478–496. https://consensus.app/papers/spatial-spillover-effects-of-fiscal-decentralization-on-thanh-nguyen/443053250ff959f6b51b40f8bccb54ce/?utm_source=chatgpt
Ullah, A., Wang, T., & Yao, W. (2021). Modal regression for fixed effects panel data. Empirical Economics, 60(1), 261–308. https://doi.org/10.1007/s00181-020-01999-w
Wang, Y., Li, J., Ma, W., Li, Y., Xiong, X., & Yu, X. (2024). Fiscal decentralization and citizens' satisfaction with public services: Evidence from a micro survey in China. Cities, 150, 105095. https://doi.org/10.1016/j.cities.2024.105095
Wu, H., Qiu, Y., Li, X., Fan, M., Wan, K., & Zhang, M. (2023). The drivers of carbon emissions in China: the perspective of fiscal decentralization. Environmental Science and Pollution Research, 30(24), 65879–65891. https://doi.org/10.1007/s11356-023-27001-5
Xu, W., & Lin, J. (2022). Fiscal Decentralization, Public Health Expenditure, and Public Health–Evidence From China. Frontiers in Public Health, 10. https://doi.org/10.3389/fpubh.2022.773728
