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Flypaper Effect in Indonesia: The Case of Kalimantan

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  • Yarlina Yacoub

    (Faculty of Economics and Business, Tanjungpura University, Indonesia Author-2-Name: Nindya Lestari Author-2-Workplace-Name: Faculty of Economics and Business, Tanjungpura University, Indonesia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

Objective - Changes in financial authority as a result of decentralization are expected to make provinces in Indonesia become more flexible in approving their finances. However, it goes beyond central government transfers which make local governments more consumptive, which impacts on the phenomenon of the effect of flypaper. This study aims to identify the influence of the government's fiscal on regional expenditure and identify the effect of flypaper on the regional expenditure in Kalimantan.Methodology/Technique � The research uses panel data from 56 regencies and cities on Kalimantan Island. Pooled least square method is used.Findings � The results show that intergovernmental fiscal revenue has a significant relationship with expenditure. Further, the flypaper effect occurs in regional expenditure which means that districts and cities in Kalimantan are still dependent on the central government to finance regional expenditures. They are not able to maximize their respective regional income.Novelty � These results indicate that the existence of local revenue derived from taxes has not been able to be optimally absorbed. Thus, dependence on intergovernmental transfers is very high. In addition, the flypaper effect also indicated that the intervention of the central government came into regional development planning programs.Type of Paper - Empirical.

Suggested Citation

  • Yarlina Yacoub, 2019. "Flypaper Effect in Indonesia: The Case of Kalimantan," GATR Journals jfbr164, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:jfbr164
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    References listed on IDEAS

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    More about this item

    Keywords

    Flypaper Effect; Intergovernmental Transfer; Fiscal; Grants.;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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