Flypaper Effect: The Shifting Unconditional Transfer and Private Income in Indonesia
Abstract
This study aims to analyze the behavioral pattern of local government as seen from their spending regarding unconditional transfer and private income. Flypaper effect has been a major phenomenon in academic research. Nevertheless, in Indonesia, such research, especially the one focusing on the shift of unconditional transfer and private income, never been caried out. Over 22 years, Indonesia has been implementing decentralization which makes it more intriguing to see local governments’ budget and spending decisions’ motives. This paper uses a panel data from 476 districts and cities in Indonesia for 11 years. Classical assumption tests, endogeneity test as well as instrumental validation test were caried out before doing the regression. The result from two-stage least square regression shows that flypaper effect does not present in total spending yet appears in four other kinds of spending. Asymmetric response of those five are quite varied. Total expenditure and capital expenditure have symmetrical response. Meanwhile, operational spending and transfer spending have a fiscal replacement type of asymmetry. On the other hand, unexpected spending shows a fiscal restraint asymmetry. The direction of private income’s influence to spending also seen to be different from one another.
Full Text:
PDFReferences
Acosta, P. (2008). The "Flypaper Effect" in Presence of Spatial Interdependence: Evidence from Argentinean Municipalities. Annals of Regional Science, 453-466.
Amalia, F. (2017). Flypaper Effect of Regional Expenditures and It's Impact to Regional Inequality in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 125 - 138.
Bailey, S. J., & Connolly, S. (1998). The Flypaper Effect: Identifying Areas for Further Research. Public Choice, 335-361.
Bastida, F., Benito, B., & Guillamón, M.-D. (2009). An Empirical Assessment of the Municipal Financial Situation in Spain. International Public Management Journal, 484-499.
Boyne, G. A. (1990). Central Grants and Local Policy Variation. Public Administration, 207-233.
Bradford, D. F., & Wallace, O. (1971). The Analysis of Revenue Sharing in a New Approach to Collective Fiscal Decisions. The Quarterly Journal of Economics, 416-439.
Breuch, T. S., & Pagan, A. R. (1980). The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics. The Review of Economic Studies, 239-253.
Dahlby, B., & Ferede, E. (2015). The Stimulative Effects of Intergovernmental Grants and the Marginal Cost of Public Funds. International Tax Public Finance.
Durbin, J. (1954). Errors in variables. Review of the International Statistical Institute, 23-32.
Gamkhar, S., & Oates, W. (1996). Aymmetries in the Response to Increases and Decreases in Intergovernmental Grants: Some Empirical Findings. National Tax Journal, 501-512.
Gennari, E., & Messina, G. (2013). How sticky are local expenditures in Italy? Assessing the Relevance of the Flypaper Effect through Municipal Data. International Tax Public Finance, 324-344.
Gramlich, E. (1969). State and Local Governments and Their Budget Constraint. International Economic Review, 163-182.
Hapsoro, D., & Yoduke, R. (2019). Fiscal Illusion Detection and Their Effect on Economic Growth in Sulawesi. Jurnal Economia, 172-188.
Haskell, M. A. (1964). Federal Grants-in-Aid: Their Influence on State and Local Expenditures. Canadian Journal of Economcis and Political Science, 585-591.
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 1251-1271.
Henderson, J. (1968). Local Government Expenditures: A Social Welfare Analysis. Review of Economics and Statistics, 156-163.
Heyndels, B. (2001). Asymmetries in the Flypaper Effect: Empirical Evidence for the Flemish Municipalities. Applied Economics, 1329-1334.
Hoechle, D. (2007). Robust standard errors for panel regressions with cross-sectional dependence. The Stata Journal, 281-312.
Inman, R. P. (2008). The Flypaper Effect. Philadelphia: University of Pennsylvania and NBER.
Inman, R. P. (2009). The New Palgrave Dictionary of Economics. Palgrave Macmillan, 1-6.
Iskandar, I. (2015). Flypaper effect at the local governments: an empirical analysis for Aceh Province. 24-32.
Karnik, A., & Lalvani, M. (2005). Urban Local Governments and the Flypaper Effect: Evidence from Maharashtra, India. Publius, 273-295.
Khusaini, M. (2018). Keuangan Daerah. Malang: UB Press.
Khusaini, M. (2019). Does Bureaucracy Lead to Economic Development Development in ASEAN? Int. J. Economic Policy in Emerging Economies, 166-174.
King, D. (1984). Fiscal Tiers - The Economics of Multi-Level Government. London: Allen and Unwin.
Lago-Peñas, S. (2008). Local Governments' Asymmetric Reactions to Grants. Public Finance Review, 219-242.
Levaggi, R., & Zanola, R. (2003). Flypaper Effect and Sluggishness: Evidence from Regional Health Expenditure in Italy. International Tax and Public Finance, 535-547.
Mehiriz, K., & Marceau, R. (2014). The Flypaper and Asymmetric Effects of Intergovernmental Grants to Quebec Municipalities. Public Budgeting & Finance, 85-102.
Millo, G. (2017). Robust Standard Error Estimators for Panel Models: A Unifying Approach. Journal of Statistical Software, 1-27.
Murniasiha, E., & Mulyadi, M. S. (2011). Pengaruh Transfer Pemerintah Pusat terhadap Perilaku Fiskal Pemerintah Daerah di Provinsi Kalimantan Timur. Jurnal Ekonomi dan Pembangunan Indonesia, 56-71.
Pangestuty, F. W., & Prasetyia, F. (2021). Ekonomi Pembangunan: Kajian Teoritis dan Studi Kasus. Malang: UB Press.
Prasetyia, F., & Pangestuty, F. W. (2021). Analisis Kebijakan Publik: Pendekatan Ekonomi dan Studi Kasus. Malang: UB Press.
Rios, V., Hortas-Rico, M., & Pascual, P. (2021). What Shapes the Flypaper Effect? The Role of the Political Environment in the Budget Process. Local Government Studies, 1-27.
Samal, A. (2018). An Empirical Analysis of Asymmetry and Threshold Effect of Intergovernmental Grants in India: A Panel Data Analysis. Global Business Review, 1-15.
Solikin, A. (2016). Analisis Fypaper Effect pada Pengujian Pengaruh Dana Aokasi Umum (DAU), Pendapatan Asli Daerah (PAD), dan Sisa Lebih Penghitungan Anggaran (SILPA) terhadap Belanja Pemerintah Daerah di Indonesia (Studi Tahun 2012-2014). Jurnal Akuntansi dan Bisnis, 11-25.
Stock, J. H., & Watson, M. W. (2008). Heteroskedasticity-Robust Standard Errors for Fixed Effects Panel Data Regression. Econometrica, 155-174.
Wilde, J. A. (1971). Grants-in-Aid: The Analytics of Design and Response. National Tax Journal, 143-155.
Wu, D.-M. (1974). Alternative tests of independence between stochastic regressors and disturbances: Finite sample results. Econometrica, 529-546.
Zamrud Siswa Utama, M. K. (2017). Kebijakan Fiskal di Persimpangan, Pro Growth atau Pro Poor? Indonesian Treasury Review: Jurnal Perbendaharaan, Keuangan Negara dan Kebijakan Publik, 67-81.
DOI: https://doi.org/10.32535/jicp.v5i4.1935
Refbacks
- There are currently no refbacks.
Copyright (c) 2022 Sherlita Nurosidah, Mohamad Khusaini, Ferry Prasetyia
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Published by:
AIBPM Publisher
Editorial Office:
JL. Kahuripan No. 9 Hotel Sahid Montana, Malang, Indonesia
Phone:+62 341 366222
Email: journal.jicp@gmail.com
Website:http://ejournal.aibpmjournals.com/index.php/JICP
Supported by: Association of International Business & Professional Management
If you are interested to get the journal subscription you can contact us at admin@aibpm.org.
ISSN 2622-0989 (Print)
ISSN 2621-993X (Online)
DOI:Prefix 10.32535 by CrossREF
Journal of International Conference Proceedings (JICP) INDEXED:
In Process
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.