Studi kebijakan fiskal untuk mengatasi ketimpangan pendapatan antar wilayah di Indonesia

Abstract

In the past decade Indonesia has witnessed an increase in regional income inequality. The inequality causes government capital expenditure in poor regions has an effect that is far from optimal to regional GDP. To maximize this, we argue the need to increase the capital expenditure by regional government in poor regions. An increase in income inequality induces an income gap between rich and poor regions. The installment of hold harmless rule adds to an increase in regional inequality. In decentralization era, General Allocation Fund (also known as Dana Alokasi Umum (DAU)), has primary function to minimize the gap between rich and poor regions. The general objective of this study is to analyze regional inequality and find some fiscal policy that could be used to address the inequality issue. In specific, this study analyzes the determinants of regional government capital goods, regional GDP and regional inequality. In addition to that, this study also aims to find an alternative formula for the DAU to strengthen its function as equalization grants. We use panel data regression at the provincial level that spans between 2001-2010 to find the determinants of regional government capital goods, regional GDP and regional inequality. In addition to panel data regression, we also use correlation analysis between actual DAU, revision DAU and Shah’s DAU (2012) with regional GDP per capita to infer which of the formula could serve DAU true purpose. For the horizontal inequality, this study calculates Williamson Index. We find that in the last decade Indonesia has witnessed a worsening regional inequality despite the improvement made by the removal of the hold harmless rule. Based on the panel estimation, the determinants for regional government capital expenditure are increase in PAD, DAU, DAK and the removal of the hold harmless rule. While in the other model, we find that increased in regional government’s capital expenditure, investment, the removal of hold harmless rule, and population has positive effect to regional GDP per capita. Finding that the effect of capital expenditure to regional GDP in rich regions reiterates the need to increase poor regions government expenditure capacity by allocating more DAU and DAK. The determinants for decreasing inequality are increased in DAU, DAK, the removal of hold harmless, infrastructure and population control. Lastly, this study finds that the removal of hold harmless rule could reinforce DAU primary purpose to reduce regional income inequality. On the alternative formula, this study advocates the use of the revisional DAU formula based UU. No. 33/2004 and Shah’s (2012) DAU formula.