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Jurnal Ekonomi dan Studi Pembangunan

Abstract

This study aims to test and analyze the effect of fiscal decentralization on Indonesia's development performance using a structural equation model. This type of data uses panel data from thirty-four provinces and five-year series (2015-2019), bringing the number of observations to 180. Data is sourced from the Directorate General of Fiscal Balance and the Central Bureau of Statistics (BPS). Data analysis uses a structural equation modeling-partial least square (SEM-PLS) with Smart-PLS 3. The evaluation results of the external model conclude that all indicators of fiscal decentralization variables and economic development performance variables are valid. The most powerful indicators that reflect the latent variables of budgetary decentralization are regional income ratios, and economic development performance indicators are economic growth. The results of the evaluation model found that there was a positive and significant effect of fiscal decentralization on economic development performance. Inequality of fiscal decentralization among the provinces in Indonesia caused the ratio of original regional income in research to have the lowest effect compared to the proportion of provincial revenues and expenditures.

First Page

171

Last Page

181

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