Hadi Sasana, Suharnomo, Imam Ghozali, Ivo Novitaningtyas
The escalation of the government spending in the form of capital expenditures increases Gross Domestic Product (GDP). The purpose of this study is to analyze the role of government spending on the economy at the provincial level in Indonesia in the era of autonomy and fiscal decentralization. Data were analyzed using the Fixed Effects Model (FEM) from panel data regression. The estimation result showed that capital expenditure does not affect provincial GRDP in Indonesia. This condition was caused by the relatively small proportion of capital expenditure allocation, and rent-seeking behavior such as corruption behavior of local bureaucrats that affected the realization of budget allocation to be ineffective and inefficient. Meanwhile, tax has a positive effect on provincial GRDP in Indonesia. The result of this study also showed that private investment has a positive effect on provincial GRDP in Indonesia. Moreover, labor also has a positive effect on provincial GRDP in Indonesia.
GDP, capital expenditure, tax, investment, labor
Cite this paper
Hadi Sasana, Suharnomo, Imam Ghozali, Ivo Novitaningtyas. (2019) Impact of Capital Expenditure, Tax, Investment on Economic Growth: Empirical Study of the Implementation of Fiscal Decentralization in Indonesia. International Journal of Economics and Management Systems, 4, 272-280