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Original Research Article Open Access SINTA 2 Accredited

Regional Financial Performance and Inclusive Economic Development

Empirical Evidence From Provinces in Indonesia

Authors

  • Lalu Riza Ihwandi * Corresponding author
  • Khoirunurrofik
  • Master Study Program in Economic Planning and Development Policy, Faculty of Economics and Business, Jakarta, Universitas Indonesia
  • *Corresponding author
DOI
10.21787/jbp.15.2023.417-429
Published & Pages
31 August 2023 · pp. 417-429
Manuscript History
Received30 Jun 2023 Accepted21 Aug 2023 Published31 Aug 2023
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CC Attribution-NonCommercial-ShareAlike 4.0
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Abstract

This study aims to analyze the relationship between regional financial performance and inclusive economic development in Indonesia using secondary data from 34 provinces in Indonesia from 2011-2021. The data sources for this study were collected from the National Development Planning Agency, Directorate General of Fiscal Balance, and Statistics Indonesia. This study uses panel data regression analysis with a fixed effect model because it can reduce bias compared to other panel data models, especially those caused by unobservable time-invariant variables. The results showed that regional financial performance, as measured by the fiscal decentralization ratio, fiscal independence ratio, capital expenditure ratio, and social assistance expenditure ratio, significantly influenced inclusive economic development in Indonesia. Fiscal decentralization and social assistance spending have a positive relationship with inclusive economic development. Meanwhile, fiscal independence and capital expenditure have a negative relationship with inclusive economic growth.

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