Discretionary Fiscal Transfers In Indonesia

Indonesia has undertaken a vast decentralization reform since 2001, transferring the responsibility to deliver public services in health, education, and infrastructure from the central government to the district governments. To provide these services, district governments are highly dependent on government transfers. Some of these transfer schemes are formula-based. However, there are two schemes of transfers in the system of intergovernmental fiscal transfers between the central government and the district governments over which the central government has discretionary power. The purpose of this project is to identify the determinates of these government transfers. We seek to identify to what extent these allocations are influenced by political considerations as opposed to needs-based or efficiency considerations. In particular, are politically aligned districts or the home districts of the president favored over non-aligned districts? While empirical evidence on this has emerged mostly for developed countries, a comparable analysis for Indonesia is still missing. This project is intended to close this gap, building a foundation for improving the effectiveness of transfers in Indonesia’s decentralized government system, and hence the public service provision in education, health, and road infrastructure at the local level.

contact person: Prof. Dr. Günther Schulze
Phone: 0761 203-2342
Email: guenther.schulze@vwl.uni-freiburg.de

Start of project: 15.10.2014
End of project: 15.04.2015

Albert-Ludwigs-University Freiburg
Schulze G
Abteilung für Internationale Wirtschaftspolitik
am Institut für Allgemeine Wirtschaftsforschung
Platz der Alten Synagoge
79085 Freiburg i. Br.
Germany

Phone: 0761-203 2342
Fax: 0761-203 2414
Email: judith.mueller@vwl.uni-freiburg.de
http://www.vwl.uni-freiburg.de/iwipol/sopo.htm
Actual Research Report

• Gonschorek G
• Schulze G
• Sjahrir Putra B

Fiscal decentralization, political connections, intergovernmental fiscal transfers