Page 1 of 8
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 11
November 2016
http://edupediapublications.org/journals/index.php/JSMaP/
The Effect of Local Revenue and Local Expense on Economic GROWTH (Study In The
Regencies And Cities of North Moluccas Province Within 2006-2015)
Rudin M1)*
, Maria Lea Frensy Bakarbessy2)
, Andi Matulada Amir3)
, Vita Yanti
Fattah3)
, Suardi3)
1)Doctoral Student of Economic Science, Tadulako University, Palu, Indonesia
2)MagisterStudent of Public Administration, Tadulako University, Palu, Indonesia
3)Advisor, Doctor Economic Science, Tadulako University, Palu, Indonesia
E-mail: rudin.ternate@gmail.com; maria.ternate83@gmail.com; andi_@yahoo.com;
vita_fattah@yahoo.com; suardi@yahoo.com
Abstract
This research’s aim was to know the effect of local revenue and local expense on regencies
and cities’ economic growth in North Moluccas. The population was 8 regencies and 2 cities
in North Moluccas. The research used panel data from the combination of cross section and
time series data. The research results showed that 1) locally generated revenue, general
allocation fund, employee’s expense, and goods and services’ expenses were together affect
the economic growth, 2) locally generated revenue was significantly affect the economic
growth, 3) general allocation fund was significantly affect the economic growth, 4)
employee’s expense was significantly affect the economic growth, and 5) goods and services’
expenses was not significantly affect the economic growth. The local government of North
Moluccas is suggested to increase the locally generated revenue by increasing the quality of
personnel resources through training and education, and maximize the data and information
system of local financial management. The government should empower the regencies and
cities of North Moluccas to increase the allocation proportion of goods and capital expenses
in APBD, thereby accelerating the availability of public service’s facilities and infrastructure
and continue sanctions impositions to the regencies and cities which are late to submit the
APBD.
Keywords: employee’s expense; general allocation fund; goods and servoce expense; local
revenue; local expense; and economic growth.
1.1 Introduction
The implementation of regional
autonomy in the Unitary State of the
Republic of Indonesia is now referring to
the Constitution Number 23 Year 2014
about Local Government [1], in which
Article 1 paragraph 6 stated that: “the
implementation of regional autonomy is
the right, authority, and obligation of
regions to independently set and manage
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Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 11
November 2016
http://edupediapublications.org/journals/index.php/JSMaP/
their government affairs and local society
concern in the Unitary State of the
Republic of Indonesia.
In the implementation of
decentralization, The Republic of
Indonesia gives an authority to the local
government to be freely managing their
local resources independently. Every
region is given an authority and is asked to
increase the local autonomy, so that they
can freely manage their local resources for
the achievement of balanced regional
development. The main source of local
government’s fund is from the local
revenue. It is used to carry out the
development of every region, including
community’s equitable distribution of
income in the local area [2].
Local revenue is the right of local
government that was approved as net asset
value adder within the related year
according to Constitution Number 33
Article 1 paragraph 13, Year 2004 [3].
Local revenue is incoming current of local
cash obtained from local government’s
activity during a period that had caused the
addition of equity and is not obtained from
loan that must be returned [4]. Local
revenue is obtained from locally generated
revenue, equalization funds, and the other
local revenues [5].
Local expense is all of the
expenditures of local government in a
period of budget in the form of outward
current assets, used to carry out the
obligations, authorities, and
responsibilities to the society and central
government. According to the Constitution
Number 23 Article 298 Year 2014, it had
been explained that: 1) Local expense’s
priority is to fund the obligatory
government’s affairs related to basic
service that had been set with minimal
service standard, 2) Local revenue is
guided by technical standard and regional
unit price standard in accordance with the
constitutional rule, 3) Local expense for
funding the government’s affairs as the
regional authority is both guided by the
analysis of expense standard and regional
unit price standard in accordance with the
constitutional rule, 4) Grant expense and
social assistance budgeted in APBD is in
accordance with the local financial
capability after prioritizing the obligatory
and selected government’s affairs expense,
except otherwise specified in the
Constitutional rule.
Economic growth is one of the
indicators that are generally used in
determining developmental success.
Economic growth is used as the
measurement of development and the
economic progress of a country or region,
because it is strongly related with society’s
economic activities particularly in
increasing the production of goods and
services [6].
According to the theory of David
Ricardo, economic growth is determined
by limited number of natural resources,
and the number of resident producing labor
adjusting them with the wage, above or
below the minimal wage. Development of
technology increases the productivity of
labor. It also slower the process of
diminishing returns deterioration of the
wage rate and profit towards their
minimum level [7].
Page 3 of 8
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 11
November 2016
http://edupediapublications.org/journals/index.php/JSMaP/
According to the theory of Thomas
Robert Malthus, the measurement of
economic development’s success is the
state’s welfare, that is when the potential
PNB increasing. The dominant sectors are
agriculture and industry. If the outputs of
these two sectors are increasing, the
potential PNB can be increased. The
growth theory by A. Lewis explains that
economic growth begin in a developing
country that has two sectors with different
characteristics, that is traditional
agriculture subsystems in the village and
modern industries in big cities [7].
1.2 Methodology and Techniques Used
Research Type
This research was a descriptive and
verification research. The descriptive
research explained the development of
local revenue, local expense, and the
economic growth of regencies/cities in
North Moluccas Province. The verification
research tests the hypothesis (H) to know
the effect of local revenue and local
expense on economic growth.
Location and Time of Research
The research was located on
regencies/cities in North Moluccas
Province, Indonesia, and was done in six
months since the research proposal
seminar. The location had been chosen
based on the data and information related
to the main problems of the research,
which are local revenue, local expense,
and economic growth. Besides, North
Moluccas Province is a provincial division
from Moluccas Province so that a research
of local revenue, local expense, and
economic growth is needed there.
Population
The population of this research
included the reports of local revenue,
reports of local expense, and reports of
economic growth of 8 regencies and 2
cities in North Moluccas Province.
Because of researcher’s limitation in
reaching the population, sample was not
used in this research.
Variables’ Operational Definition
Research’s variables are anything
stated by the researcher to be studied so
that the readers can have the information
related to the things and draw the
conclusion [8]. The variables used in this
research were dependent variables and
independent variables.
Table 1. The Matrix of Variables’
Operational.
No Variable Indicators Scale
Data
Sources
1 Locally
Generate
d
Revenue
General
Allocatio
Local
Taxes,
Local
Retributio
n,
Living
Ratio BPS RI,
North
Molucc
as BPS,
Central
Sulawes
i BPS,
