The Effect of Local Government Spending Behavior on Local Economic Growth in Indonesia

Authors

Arsy Fajriar, Prodi Ilmu Ekonomi, Fakultas Ekonomi dan Bisnis, Universitas Indonesia, Depok, IndonesiaFollow
Khoirunurrofik Khoirunurrofik, Prodi Ilmu Ekonomi, Fakultas Ekonomi dan Bisnis, Universitas Indonesia, Depok, IndonesiaFollow

Abstract

This study employs a dynamic panel data approach to assess the impact of year-end spending spikes on real GDP growth. By addressing econometric issues, it explores how these spending patterns influence economic performance. The analysis includes island-by-year effects to capture regional variations. The estimation results indicate that year-end spending spikes significantly reduce real GDP growth, particularly in districts where reliance on government expenditure for infrastructure development is more pronounced. Even in cities with higher fiscal independence, the impact remains, highlighting the importance of efficient spending management. Additionally, districts/cities outside Java Island experience considerable economic consequences due to delayed local government spending, especially in capital expenditure. This research underscores the need for timely and effective government spending to foster sustained economic productivity.

First Page

56

Last Page

72

Recommended Citation

Fajriar, Arsy and Khoirunurrofik, Khoirunurrofik (2025) "The Effect of Local Government Spending Behavior on Local Economic Growth in Indonesia," Jurnal Ekonomi dan Studi Pembangunan: Vol. 17: No. 2, Article 7.
Available at: https://citeus.um.ac.id/jesp/vol17/iss2/7