The Role of Regional Government Expenditures on Regional Economic Growth in Indonesia
Agus Tri Basuki,Yunastiti Purwaningsih, AM Soesilo and Mulyanto
Universitas Muhammadiyah Yogyakarta and Universitas Sebelas Maret Surakarta
Abstract
This research aims at empirically proving the composition of local government expenditure (education, health, marine and fisheries, agriculture, and general allocation fund) on economic growth in 18 provinces in Indonesia from 2010 to 2015. The model used in this research is panel data regression. The research results indicate: Firstly, the government expenditure component for marine and fisheries has the greatest contribution in driving economic growth in Indonesia, and this just suits the shape of its territory with 2/3 of it consisting of waters. Secondly; the government expenditure component for agriculture give the second greatest contribution after marine and fisheries expenditure, which suits the employment absorption in Indonesia, i.e. 35 percent of them is absorbed in agriculture sector. Thirdly; the Government expenditures for education and foreign investment have no influence on local economic growth.
Keywords: economic growth, data panel, government expenditure, and fiscal policy.
Topic: International Conference of Islamic Economic and Financial Inclusion