Does Fiscal Decentralization Encourage Corruption in Local Governments? Evidence from Indonesia
Abstract
:1. Introduction
2. Literature Review
3. Data and Methodology
3.1. Data Construction
3.2. Baseline Model
4. Estimation Results and Discussion
4.1. Random Effects Model—Discussion
4.2. System Generalized Method of Moments (GMM) Model—Discussion
Robustness Checks
5. Conclusions
Funding
Conflicts of Interest
References
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Variable | Observation | Mean | Std. Dev. | Min | Max |
---|---|---|---|---|---|
corruption | 209 | 0.43 | 0.82 | 0 | 4.97 |
expenditure decentralization | 154 | 0.46 | 0.47 | 0.07 | 2.62 |
tax revenue decentralization | 169 | 0.10 | 0.26 | 0 | 1.44 |
government size | 142 | 3.25 | 2.19 | 0.60 | 12.14 |
ln rgdp percapita | 209 | 9.86 | 0.96 | 2.75 | 12.07 |
productive age population | 209 | 135.42 | 11.70 | 114.92 | 157.71 |
education | 209 | 64.71 | 5.15 | 51.39 | 77.76 |
ethnolinguistic index | 209 | 0.63 | 0.24 | 0.04 | 0.91 |
political index | 209 | 45.37 | 42.43 | 0 | 98.51 |
Variable | Corruption | Expenditure Decentralisation | Tax Revenue Decentralisation | Government Size | ln Rgdp per Capita | Productive Age Population | Education | Ethnolin Guistic Index | Political Index |
---|---|---|---|---|---|---|---|---|---|
corruption | 1.00 | ||||||||
expenditure decentralization | 0.14 | 1.00 | |||||||
tax revenue decentralization | −0.01 | 0.81 | 1.00 | ||||||
government size | −0.08 | −0.04 | −0.08 | 1.00 | |||||
ln rgdp percapita | 0.41 | 0.50 | 0.39 | −0.07 | 1.00 | ||||
productive age population | 0.31 | 0.36 | 0.32 | −0.19 | 0.36 | 1.00 | |||
education | 0.19 | 0.29 | 0.26 | 0.12 | 0.38 | 0.31 | 1.00 | ||
ethnolinguistic index | 0.25 | −0.05 | 0.10 | 0.22 | 0.16 | 0.21 | −0.05 | 1.00 | |
political index | 0.12 | 0.09 | −0.07 | −0.07 | 0.25 | −0.08 | 0.19 | 0.01 | 1.00 |
Dependent Variable: Corruption | (1) | (2) | (3) | (4) | (5) | (6) |
---|---|---|---|---|---|---|
expenditure decentralization | 0.912 ** | 1.095 *** | 0.884 ** | |||
(0.397) | (0.382) | (0.401) | ||||
tax revenue decentralization | −0.570 | −0.749 | −0.748 | |||
(0.579) | (0.561) | (0.602) | ||||
government size | −0.223 *** | −0.236 *** | −0.218 *** | −0.114 * | −0.118 * | −0.106 |
(0.083) | (0.079) | (0.084) | (0.067) | (0.065) | (0.068) | |
ln rgdp percapita | 0.048 | 0.049 | 0.045 | 0.065 | 0.068 | 0.062 |
(0.086) | (0.082) | (0.087) | (0.085) | (0.082) | (0.085) | |
education | −0.082 * | −0.086 * | −0.087 * | −0.069 | −0.064 | −0.075 |
(0.049) | (0.046) | (0.050) | (0.047) | (0.045) | (0.047) | |
ethnolinguistic | −1.006 | 0.018 | ||||
(0.817) | (0.684) | |||||
political index | −0.001 *** | −0.001 *** | ||||
(0.00075) | (0.0003) | |||||
productive age population | 0.009 | 0.017 | ||||
(0.016) | (0.016) | |||||
constant | 5.522 * | 6.071 ** | 4.909 | 4.244 | 3.909 | 2.714 |
(3.256) | (3.082) | (3.458) | (3.130) | (2.985) | (3.436) | |
Year fixed effects | yes | yes | yes | yes | yes | yes |
Province fixed effects | yes | yes | yes | yes | yes | yes |
Number of observations | 209 | 209 | 209 | 209 | 209 | 209 |
R-squared | 0.502 | 0.552 | 0.504 | 0.466 | 0.509 | 0.472 |
Dependent Variable: Corruption | (1) | (2) | (3) | (4) | (5) | (6) |
---|---|---|---|---|---|---|
corruption (t − 1) | 0.322 * | 0.141 | −0.252 | −0.118 | −0.056 | 0.207 * |
(0.165) | (0.244) | (0.163) | (0.199) | (0.296) | (0.116) | |
expenditure decentralization | 2.421 *** | −0.607 | 1.675 ** | |||
(0.827) | (1.485) | (0.853) | ||||
tax revenue decentralization | 4.578 ** | −3.334 | 1.008 | |||
(2.267) | (3.521) | (1.350) | ||||
government size | 0.088 ** | 0.253 * | 0.198 *** | 0.158 ** | 0.385 ** | 0.082 ** |
(0.037) | (0.137) | (0.055) | (0.067) | (0.169) | (0.037) | |
ln rgdp percapita | 0.192 | 0.866 ** | −0.120 | 1.140 *** | 1.651 *** | 0.316 *** |
(0.131) | (0.361) | (0.174) | (0.220) | (0.551) | (0.088) | |
education | −0.258 *** | −0.524 ** | −0.228 *** | −0.186 *** | −0.692 *** | −0.279 *** |
(0.057) | (0.215) | (0.056) | (0.039) | (0.256) | (0.052) | |
ethnolinguistic | 8.589 | −1.316 *** | ||||
(5.759) | (0.562) | |||||
political index | −0.001 * | −0.011 | ||||
(0.001) | (0.009) | |||||
productive age population | 0.144 *** | 0.055 * | ||||
(0.054) | (0.031) | |||||
Year fixed effects | yes | yes | yes | yes | yes | yes |
Province fixed effects | yes | yes | yes | yes | yes | yes |
Number of observations | 209 | 209 | 209 | 209 | 209 | 209 |
Number of instruments | 12 | 14 | 14 | 12 | 14 | 13 |
Hansen test (p-value) | 0.229 | 0.425 | 0.51 | 0.865 | 0.689 | 0.448 |
AR (2) p-value | 0.508 | 0.751 | 0.592 | 0.602 | 0.562 | 0.593 |
Dependent Variable: Corruption | (1) | (2) | (3) | (4) | (5) | (6) |
---|---|---|---|---|---|---|
corruption (t − 1) | 0.9917 *** | 1.0546 *** | 1.0142 *** | 0.8643 ** | 0.8400 ** | 0.8850 *** |
(0.0719) | (0.2254) | (0.0764) | (0.3440) | (0.4019) | (0.2763) | |
expenditure dec growth rate | 0.7669 * | 0.6370 | 0.8573 * | |||
(0.4292) | (0.5570) | (0.4774) | ||||
tax revenue dec growth rate | 2.7931 *** | 2.5518 * | 2.2015 | |||
(3.0039) | (3.7174) | (2.3692) | ||||
government size | 0.0717 *** | 0.0037 | 0.0141 | 0.0360 ** | 0.0271 | 0.0353 |
(0.0151) | (0.0723) | (0.0181) | (0.0151) | (0.0372) | (0.0352) | |
ln rgdp percapita | 0.0154 | 0.166 *** | −0.0142 | 1.3017 *** | 0.2929 *** | 0.2253 |
(0.0214) | (0.0270) | (0.0249) | (0.3451) | (0.0393) | (0.2244) | |
education | 0.0025 | 0.0074 | 0.0091 | −0.0480 | −0.0460 | −0.0465 |
(0.0026) | (0.0095) | (0.0085) | (0.0546) | (0.0593) | (0.0513) | |
ethnolinguistic | −0.7035 | −0.999 *** | ||||
(1.2405) | (0.4057) | |||||
political index | −0.0067 | −0.0020 | ||||
(0.0042) | (0.0032) | |||||
productive age population | 0.0032 | 0.0048 | ||||
(0.0039) | (0.0080) | |||||
Year fixed effects | yes | yes | yes | yes | yes | yes |
Province fixed effects | yes | yes | yes | yes | yes | yes |
Number of observations | 190 | 190 | 190 | 190 | 190 | 190 |
Number of instruments | 12 | 14 | 14 | 12 | 14 | 13 |
Hansen test (p-value) | 0.421 | 0.388 | 0.475 | 0.323 | 0.833 | 0.850 |
AR (2) p-value | 0.416 | 0.381 | 0.419 | 0.326 | 0.448 | 0.335 |
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Share and Cite
Alfada, A. Does Fiscal Decentralization Encourage Corruption in Local Governments? Evidence from Indonesia. J. Risk Financial Manag. 2019, 12, 118. https://doi.org/10.3390/jrfm12030118
Alfada A. Does Fiscal Decentralization Encourage Corruption in Local Governments? Evidence from Indonesia. Journal of Risk and Financial Management. 2019; 12(3):118. https://doi.org/10.3390/jrfm12030118
Chicago/Turabian StyleAlfada, Anisah. 2019. "Does Fiscal Decentralization Encourage Corruption in Local Governments? Evidence from Indonesia" Journal of Risk and Financial Management 12, no. 3: 118. https://doi.org/10.3390/jrfm12030118