Does Government Expenditure Affect Regional Inclusive Growth? An Experience of Implementing Village Fund Policy in Indonesia

Ernawati Ernawati, Tajuddin Tajuddin and Syamsir Nur
Additional contact information
Ernawati Ernawati: Department of Economics and Development Studies, Halu Oleo University, Kampus Hijau Bumi Tridharma Anduonohu, Kendari City 93232, Indonesia
Tajuddin Tajuddin: Department of Economics and Development Studies, Halu Oleo University, Kampus Hijau Bumi Tridharma Anduonohu, Kendari City 93232, Indonesia
Syamsir Nur: Department of Economics and Development Studies, Halu Oleo University, Kampus Hijau Bumi Tridharma Anduonohu, Kendari City 93232, Indonesia

Economies, 2021, vol. 9, issue 4, 1-12

Abstract: The village fund allocation is a policy strategy of the government of Indonesia for development in rural areas. Each village has funds sourced from the State Revenue and Expenditure Budget. The uniqueness of this strategy is the community’s involvement in determining the allocation expenditure of funds. Therefore, the program is carried out in line with the needs of the community. Rural areas generally rely on agriculture, which has lower productivity than other sectors, so they need support to achieve inclusive growth. This study analyzes whether the village fund allocation is a pro-poor, pro-equality, and pro-job policy. It uses secondary data from the Ministry of Finance, Statistics Indonesia, and the National Development Planning Agency from the period of 2015–2019 for 33 provinces of Indonesia. The data were analyzed using panel regression with three models: income inequality, poverty levels, and unemployment rates. Other variables supporting inclusive growth, including economic growth, infrastructure, and the expansion of public services, were examined. The results showed that government expenditure through village fund allocation encourages inclusive growth as a policy that is pro-poor and pro-job but not pro-equality. Economic growth, on the other hand, reduces income inequality but increases poverty. Economic infrastructure increases income inequality, while increasing access to public services reduces poverty levels and increases unemployment.

Keywords: economic growth; village fund; pro-poor; pro-equality; pro-job (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2227-7099/9/4/164/pdf (application/pdf)
https://www.mdpi.com/2227-7099/9/4/164/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:9:y:2021:i:4:p:164-:d:670602

Access Statistics for this article

Economies is currently edited by Ms. Adore Zhou

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().