The Influence of Regional Original Income and Balancing Funds on Economic Growth through Regional Expenditure in Central Java Province

Ade Mulya Pratomo; Gregorius Nasiansenus Masdjojo

doi:10.55681/economina.v5i8.3673

Authors

Ade Mulya Pratomo Magister Manajemen, Universitas Stikubank Semarang, Indonesia
Gregorius Nasiansenus Masdjojo Magister Manajemen, Universitas Stikubank Semarang, Indonesia

DOI:

https://doi.org/10.55681/economina.v5i8.3673

Keywords:

Regional Original Income, Balancing Funds, Regional Expenditure, Economic Growth, Panel Data Regression

Abstract

This study aims to examine the effect of Regional Original Revenue (Pendapatan Asli Daerah—PAD) and Fiscal Balance Funds on Economic Growth, with Regional Expenditure serving as a mediating variable in regencies and municipalities of Central Java Province during the 2021–2025 period. This study employed a quantitative approach with a causal associative research design using secondary panel data obtained from the Regional Revenue and Expenditure Budget (APBD) of 35 regencies and municipalities in Central Java Province. The data were analyzed using panel data regression with the Fixed Effect Model (FEM) and corrected using White Diagonal Standard Errors to address heteroskedasticity. The findings reveal that Regional Original Revenue has no significant effect on Regional Expenditure or Economic Growth. Conversely, Fiscal Balance Funds have a positive and significant effect on both Regional Expenditure and Economic Growth. In addition, Regional Expenditure has no significant effect on Economic Growth and is unable to mediate the relationship between Regional Original Revenue, Fiscal Balance Funds, and Economic Growth. These findings indicate that Fiscal Balance Funds remain the primary source of regional financing in supporting regional development and economic growth, while the contribution of Regional Original Revenue has not yet provided a significant direct impact.

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