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Is There A Causality Relationship Between Local Tax Revenue And Regional Economic Growth? A Panel Data Evidence From Indonesia

Author

Listed:
  • Khairul AMRI

    (Lecturer at Faculty of Islamic Economics and Business, Universitas Islam Negeri (UIN) Ar-raniry, Banda Aceh, Indonesia)

  • NAZAMUDDIN

    (Lecturer at Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh, Indonesia)

  • Raja MASBAR

    (Lecturer at Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh, Indonesia)

  • Hasdi AIMON

    (Lecturer at Faculty of Economics and Business, Universitas Negeri Padang, Padang, Indonesia)

Abstract

The main objective of the study is to investigate the causal relationship of economic growth, local tax revenue, and local retribution revenue in Indonesia. A panel data set of 24 provinces over the period of 2003-2015, and then, Pedroni's and Kao's Co-integration test, Panel Vector Error Correction Model (PVECM) and Granger causality test were applied to analyze the relationship between the variables. The finding of the study indicates that in the long run, there would be a negative relationship between local tax revenue and regional economic growth and a positive and significant relationship between local tax revenue and local retribution revenue. Granger causality test proved that there is bi-directional causality between local tax revenues and economic growth, and uni-directional causality running from local retribution revenue to economic growth and local tax revenue.

Suggested Citation

  • Khairul AMRI & NAZAMUDDIN & Raja MASBAR & Hasdi AIMON, 2019. "Is There A Causality Relationship Between Local Tax Revenue And Regional Economic Growth? A Panel Data Evidence From Indonesia," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 73-84, June.
    • Handle: RePEc:hrs:journl:v:xi:y:2019:i:1:p:73-84
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    Citations

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    Cited by:

    1. Dramane, Abdoulaye, 2022. "The Nexus between Military Spending, Tax Revenues and Economic Growth in the G5 Sahel Countries," African Journal of Economic Review, African Journal of Economic Review, vol. 10(2), March.
    2. Temel Gurdal & Mucahit Aydin & Veysel Inal, 2021. "The relationship between tax revenue, government expenditure, and economic growth in G7 countries: new evidence from time and frequency domain approaches," Economic Change and Restructuring, Springer, vol. 54(2), pages 305-337, May.
    3. Channew Maneerat & Snober Fazal, 2020. "The Influence of Tax Revenue, Government Expenditures, Fiscal Decentralization, Carbon Emission and Exports on Economic Growth of Developing Countries," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 1(2), pages 1-12, June.
    4. Panagiotis SAVIOLAKIS & Michalis PAZARZIS, 2021. "The European Response To Open Ship Registries And Flags Of Convenience Through The Creation Of Offshore And International Ship Registries," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 69-81, June.

    More about this item

    Keywords

    Local tax revenue; local retribution revenue; economic growth; and Panel Vector Error Correction Model;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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