Analysis of the Impact of Transfer Funds and Local Revenue on Government Capital Expenditure in Regencies/Cities in West Java: Testing the Existence of the Flypaper Effect

Maulani Dwi Asmarawati, Ismail Marzuki Randos

Abstract


This study analyzes the impact of transfer funds (General Allocation Fund and Special Allocation Fund) and Local Revenue on Capital Expenditure in Regency / City of West Java Province during the period 2018 2022, as well as testing the existence of the flypaper effect phenomenon. Using secondary data from the Local Government Financial Statements and BPK Audit Reports of 18 Regencies and 9 Cities in West Java, this study uses panel data regression analysis with the Random Effect Model (REM). The results show that the General Allocation Fund has no significant effect on Capital Expenditure, although it has a positive effect. In contrast, the Special Allocation Fund and Regional Original Revenue both have a positive and significant effect on Capital Expenditure. Then the results of the analysis indicate that the flypaper effect occurs in the Regency / City of West Java Province. This is due to the coefficient of Special Allocation Fund, which has a significant influence and is more dominant than Local Own Revenue in influencing Capital Expenditure. These findings provide important insights for the formulation of regional fiscal policy to be more effective in promoting development and public services in West Java.


Keywords


General Allocation Fund; Special Allocation Fund; Local Revenue; Flypaper Effect

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DOI: https://doi.org/10.24198/jaab.v8i2.65511

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