THE EFFICIENCY OF VILLAGE GOVERNMENT SPENDING IN INDONESIA: A META-FRONTIER ANALYSIS

Tengku Munawar Chalil

doi:10.22146/jieb.44660

THE EFFICIENCY OF VILLAGE GOVERNMENT SPENDING IN INDONESIA: A META-FRONTIER ANALYSIS

https://doi.org/10.22146/jieb.44660

Tengku Munawar Chalil^(1*)

(1) Doctoral Student Department of Comparative Public Policy Osaka School of International Public Policy Osaka University Japan
(*) Corresponding Author

Abstract

Introduction: This study aims to measure the efficiency of village government spending and examine the effects of village transfers (Dana Desa) and institutional properties on its efficiency. Background Problems: The village law has endowed extra grants to village governments, which questions if the villages are prepared to adequately handle large increases in funding. Novelty: While previous studies address the misappropriation in spending within the municipal dimension, this study explores the spending efficiency of the autonomous sub-municipal governments and explains the impacts of both lump-sum grants and bureaucracy factors on spending efficiency. Research Methods: This study analyzes the Indonesian 2014 Village Governments’ dataset, using the meta-cost frontier in order to measure village spending efficiency, then it probes the causal impacts of endowed fiscal transfers and bureaucratic factors on the obtained efficiency. Findings/Results: The results suggest that granting direct transfers would exacerbate the spending inefficiencies of autonomous villages. Administrative factors such as a large bureaucracy and a lack of bureaucratic capacity within the body of village governments positively affect spending inefficiencies. Conclusion: The result of this research reflects that there is a need to evaluate the village governance policy to increase spending efficiencies, specifically focusing on the adequacy of village institutions to handle village transfers.

Keywords

decentralization, efficiency, bureaucracy, Indonesia

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DOI: https://doi.org/10.22146/jieb.44660

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