An Analysis Of The Effects Of Fiscal Decentralization On Economic Growth And Community Welfare In North Sumatra Province

摘要

With the aim to exam the effect of fiscal decentralization on economic growth and community welfare, this study was conducted by taking samples of all districts/cities in North Sumatra province during 2010-2017 with the exception 2016. Using panel data which is a combination of 33 cross section data with 7-year series length, the model is analyzed by Random Effect Model (REM). Because the endogenous variables in the model are related, the method used is two stage least square (2SLS). The dependent variable consists of real economic growth and population welfare proxied by the human development index (HDI). Fiscal decentralization as the main independent variable is approached by the ratio of the relative expenditure of district / city governments to central expenditure. In addition, control variables are also used, among others: population, investment, education level and total workforce. This study found that fiscal decentralization together with other variables had an effect on economic growth and community welfare in the province of North Sumatra for the research year. However, the results of partial estimation indicate that fiscal decentralization does not affect economic growth, but has a positive and significant effect on people's welfare. It was also found that economic growth had a positive and significant influence on people's welfare.