The Role of Fiscal Decentralization on Inequality: Evidence from Papua Province
DOI:
https://doi.org/10.12928/jampe.v5i1.14475Keywords:
Fiscal decentralization, Inequality, Panel data, Unconditional transferAbstract
High income inequality is generally accompanied by unequal access to
education, job training, and business opportunities, limiting
employment opportunities for the poor. One approach that can be
applied to resolve this problem is by implementing a fiscal
decentralization policy. Papua is one of the regions categorized as 3T
(Underdeveloped, Frontier, and Outermost). This condition indicates
serious challenges in development in Papua, especially in the aspects of
basic infrastructure and fiscal independence. The main contribution of
the study is to analyze the role of fiscal decentralization on development
in Papua province. Fiscal decentralization plays an important role in
promoting regional development, particularly in disadvantaged areas.
The study used a panel data approach that combines time-series data
(2019-2023) and cross-sectional data (29 regencies and cities) in Papua
Province. The results of the study indicate that fiscal decentralization
through the General Allocation Fund (DAU) and Special Allocation Fund
(DAK) has no effect in reducing inequality rates in Papua Province. It is
due to geographical challenges and the unconditional transfer nature of
DAU and DAK. In this case, DAU is mostly used for regional routine
expenditures, while the DAK has a long-term effect on infrastructure
development, which is the major obstacle in reducing inequality in
Papua. This research implies that local governments need to improve the
effectiveness of DAU and DAK utilization by prioritizing productive
sectors.
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