Analysis of the Effect of Fiscal Decentralization on Household Welfare in West Nusa Tenggara Province, 2017–2024

Salsa Billa; Himawan Sutanto; Ali Akbar Hidayat

doi:10.55681/economina.v5i10.4757

Authors

Salsa Billa Universitas Mataram, Indonesia
Himawan Sutanto Universitas Mataram, Indonesia
Ali Akbar Hidayat Universitas Mataram, Indonesia

DOI:

https://doi.org/10.55681/economina.v5i10.4757

Keywords:

Local Own-Source Revenue, Balancing Funds, Capital Expenditure, Real Per Capita Expenditure, Household Welfare

Abstract

The objective of this study is to analyze the impact of Local Own Source Revenue (PAD) and Balancing Funds on household welfare measured by real per capita expenditure both directly and indirectly through capital expenditure as an intermediary variable in ten regencies and cities in West Nusa Tenggara Province, Indonesia, during the 2017–2024 period. This study employs a quantitative associative approach using panel data consisting of 80 observations. The data were analyzed using path analysis based on the Fixed Effects Model (FEM), with the Sobel test to examine the mediating effect. The results indicate that local revenue (PAD) has a negative but statistically insignificant effect on capital expenditure, while Balancing Funds have a positive but statistically insignificant effect. Furthermore, local revenue, Balancing Funds, and capital expenditure do not have statistically significant partial effects on real per capita expenditure. Conversely, the average number of years of schooling has a positive and statistically significant effect, while the poverty rate has a negative and statistically significant effect. The results of the Sobel test indicate that capital expenditure does not mediate the effects of either PAD or balancing funds on household welfare. Nevertheless, the overall model is statistically significant and explains 97.7% of the variance in real per capita expenditure.

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