| dc.description.abstract | Local government expenditure has increased from year to year, although the revenue is limited and most provinces depend on central government transfers to finance their expenditure. Therefore, research to determine the allocation of government expenditure need to be done in order to increase economic performance, especially increase economic growth and employment rate, and reduce income inequality and poverty. This study uses simultaneous equations model (SEM) to identify the factors that affect local government revenues and expenditure and their impact on fiscal and economic performace of regions. This study uses Three Stage Least Squares (3SLS) method to estimate parameter coefficient. The result shows that government revenue is affected by GDRP, fiscal gap, investment, and population. Government expenditure is affected by GDRP, revenue, and spending the previous year. Increased government revenues and expenditure has a positive impact on economic performance. Expenditure on industrial sector provides the greatest impact on increase in economic growth, decrease of income inequality and poverty rate. Expenditure on agriculture sector provides the greatest impact on increase in employment rate. | en |
