Nursini Nursini,

Department of Economics, Faculty of Economics and Business, 

University of Hasanuddin

Makassar South Sulawesi, Indonesia,

E-mail: nini_mahmud@yahoo.com

ORCID: 0000-0002-5374-7883

Poverty alleviation in the contex of fiscal decentralization in Indonesia

Tawakkal,

Accounting Department Polytechnique, Ujung Pandang

South Sulawesi, Indonesia

E-mail: tawakkal_1@yahoo.co.id

Abstract. Acceleration of poverty reduction in Indonesia is largely determined by the role of regional governments in implementing fiscal decentralization. Three indicators of fiscal decentralization were used to measure their effects on poverty reduction, i.e., regional government expenditures, regional government revenues, and intergovernmental transfers.  This study investigated the panel data regression models for 33 provinces in Indonesia during 2010-2016. The results show that regional government revenues and intergovernmental transfers had a statistically significant effect on reducing poverty while regional government expenditures  did not. This study confirms that in the context of fiscal decentralization in Indonesia, the increase of regional government revenues both from own source revenues and intergovernmental transfers appear to be more effective in encouraging poverty reduction than the increase of the total regional government expenditures. Therefore, it is very important for policymakers at the regional level to encourage the increase of regional revenues in order to create enough fiscal space to fund poverty alleviation programs on the one hand. On the other hand, it is necessary to increase the proportion of regional government expenditures to priority programs for poverty alleviation more than regional government operational expenditures.

Received: October, 2018

1st Revision: January, 2019

Accepted: March, 2019

DOI: 10.14254/2071-789X.2019/12-1/16

JEL Classification: H30, H72, I31, I38, O11

Keywords: fiscal decentralization, poverty, intergovernmental transfer, own source revenue, regional expenditure, Indonesia, panel data