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The Relation of Fiscal Decentralization, Regional Finance and Social Justice for the Local Development of Indonesia

Author

Listed:
  • Timbul Hamonangan Simanjuntak
  • Imam Mukhlis

Abstract

This study aims to analyze the relationship between fiscal decentralization, fiscal capacity, financial independence and financial expenditure areas in achieving social justice. In this case, the East Java Province Indonesia is supported by the existence of local government district / municipality became the main object of study during 2010 -2014. The needed data are such as; financial balance data, regional revenue, the amount of local spending and social justice data on people's lives. Data analysis method used is Partial Least Square (PLS). The results provide the conclusion that the implementation of the fiscal decentralization policy gives positive and significant impact on local fiscal capacity. Fiscal capacity gives positive and significant impact on the local financial independence. Local financial independence gives positive and significant impact on the structure of the shopping area. The structure of local government spending has a significant effect on the achievement of social justice areas. In this case, the fiscal capacity and financial independence have no direct impact significantly on the achievement of social justice in the various districts / cities in East Java. In addition, this study also provides important conclusion that there is a significant indirect effect of fiscal decentralization on social justice through local fiscal capacity, local financial independence and the structure of local government spending.

Suggested Citation

  • Timbul Hamonangan Simanjuntak & Imam Mukhlis, 2017. "The Relation of Fiscal Decentralization, Regional Finance and Social Justice for the Local Development of Indonesia," Applied Economics and Finance, Redfame publishing, vol. 4(1), pages 9-17, January.
    • Handle: RePEc:rfa:aefjnl:v:4:y:2017:i:1:p:9-17
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    References listed on IDEAS

    as
    1. Merima Ali & Abdulaziz B. Shifa & Abebe Shimeles & Firew Woldeyes, 2021. "Building Fiscal Capacity in Developing Countries: Evidence on the Role of Information Technology," National Tax Journal, University of Chicago Press, vol. 74(3), pages 591-620.
    2. Abdon, Arnelyn May & Estrada, Gemma Esther & Lee, Minsoo & Park, Donghyun, 2014. "Fiscal Policy and Growth in Developing Asia," ADB Economics Working Paper Series 412, Asian Development Bank.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    fiscal decentralization; fiscal capacity; financial independence; social justice; partial least square;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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