Indonesian local government spending, taxing and saving: An explanation of pre- and post-decentralization fiscal outcomes

Blane D. Lewis*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

26 Citations (Scopus)

Abstract

As a result of Indonesia's decentralization program, local governments have gained significantly more responsibility for service delivery, considerably larger fiscal resources, and much greater authority over the use of those resources than before. The present paper develops a simple budget model to describe and explain the substantial differences in pre- and post-decentralization local government fiscal behavior related to spending, taxing and saving. During the post-decentralization period special attention is paid to the fiscal behavior of natural resource rich regions. Among other things, the evidence suggests that: post-decentralization local government spending is partly responsive to increasing needs and partly the subject of elite capture; local government taxation has become more aggressive under decentralization and appears to be mostly driven by local bureaucratic expectations related to routine overhead budgets; and the increased savings of local governments during the post-decentralization period is determined to a large degree by delayed central government transfer payments.

Original languageEnglish
Pages (from-to)291-317
Number of pages27
JournalAsian Economic Journal
Volume19
Issue number3
DOIs
Publication statusPublished - Sept 2005
Externally publishedYes

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