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IS THERE A CAUSALITY RELATIONSHIP BETWEEN LOCAL TAX REVENUE AND REGIONAL ECONOMIC GROWTH? A PANEL DATA EVIDENCE FROM INDONESIA

Khairul Amri (), Nazamuddin (), Raja Masbar () and Hasdi Aimon ()
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Nazamuddin: Lecturer at Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh, Indonesia
Raja Masbar: Lecturer at Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh, Indonesia
Hasdi Aimon: Lecturer at Faculty of Economics and Business, Universitas Negeri Padang, Padang, Indonesia

Regional Science Inquiry, 2019, vol. XI, issue 1, 73-84

Abstract: The main objective of the study is to investigate the causal relationship of economic growth, local tax revenue, and local retribution revenue in Indonesia. A panel data set of 24 provinces over the period of 2003-2015, and then, Pedroni's and Kao's Co-integration test, Panel Vector Error Correction Model (PVECM) and Granger causality test were applied to analyze the relationship between the variables. The finding of the study indicates that in the long run, there would be a negative relationship between local tax revenue and regional economic growth and a positive and significant relationship between local tax revenue and local retribution revenue. Granger causality test proved that there is bi-directional causality between local tax revenues and economic growth, and uni-directional causality running from local retribution revenue to economic growth and local tax revenue.

Keywords: Local tax revenue; local retribution revenue; economic growth; and Panel Vector Error Correction Model (search for similar items in EconPapers)
JEL-codes: H71 O4 (search for similar items in EconPapers)
Date: 2019
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