The Impact of Fiscal Policy on Welfare Improvement in Indonesia: Study of Impact of Premium Assistance Beneficiaries on The National Health Insurance, Physical Special Allocation Fund for Health Sector, Education Sector, and Village Funds to Human Development Index

Ahmad Nawawi; Wihana Kirana Jaya; Mulyadi Sumanto; Evita Hanie Pangaribowo

doi:10.22146/jp.71691

The Impact of Fiscal Policy on Welfare Improvement in Indonesia: Study of Impact of Premium Assistance Beneficiaries on The National Health Insurance, Physical Special Allocation Fund for Health Sector, Education Sector, and Village Funds to Human Development Index

https://doi.org/10.22146/jp.71691

Ahmad Nawawi^(1*), Wihana Kirana Jaya⁽²⁾, Mulyadi Sumanto⁽³⁾, Evita Hanie Pangaribowo⁽⁴⁾

(1) Doctoral Program of Leadership and Policy Innovation, The Graduate School of Universitas Gadjah Mada, Yogyakarta, Indonesia
(2) Faculty of Social and Political Sciences, Universitas Gadjah Mada, Yogyakarta, Indonesia.
(3) Faculty of Social and Political Sciences, Universitas Gadjah Mada, Yogyakarta, Indonesia.
(4) Faculty of Geography, Universitas Gadjah Mada, Yogyakarta, Indonesia
(*) Corresponding Author

Abstract

One of the objectives of the fiscal policy is to improve public welfare. Still, there are funding constraints to improve welfare in some countries. Therefore, fiscal management to increase welfare must be implemented efficiently and effectively. In this research, to improve welfare, the fiscal policy will be focused on health, education and community empowerment which are the components of the HDI. This research used quantitative method with regression equation to explain the impact of fiscal and social policy, in the form of Recipients of Health Insurance Contribution Assistance (Penerima Bantuan Iuran Jaminan Kesehatan Nasional/ PBI JKN), physical special allocation found (Dana Alokasi Khusus/DAK) for health and education sector, village fund, region’s budget expenditure, locally generated revenue (Pendapatan Asli Daerah/PAD), and poverty level on human development index (HDI) improvement. The locus for this research is all regencies/cities in Indonesia that use panel data. The results of this research were divided into three findings. First, there were research variables with unidirectional results and significant improvement on HDI, which are physical DAK for the health and education sector, village funds, social expenditure, and PAD. Second, there were variables with unidirectional impact but it does not have a significant impact on the HDI improvement (i.e. PBI JKN). Third, there were variables with unidirectional and significant impact, such as personnel expenditure, material expenditure, capital expenditure, and poverty level.

Keywords

fiscal policy; welfare; human development index; premium assistance beneficiaries; physical special allocation fund for health and education sector; village funds

Full Text:

PDF

References

Abbas,Q.2000.“TheRoleofHumanCapital in Economic Growth: A Comparative Study of Pakistan and India”, The The Pakistan Development Review 39:4 Part II (Winter 2010) pp. 451-473.

Ali, S. A., Raza, H., and Yousuf, U. 2012. “The Role of Fiscal in Human Development: The Pakistan’s Perspective”, The The Pakistan Development Review 51:4 Part II (Winter 2012) pp. 51:4, 381-396.

Arneson, R.J. 1989. “Equality and Equal Opportunity for Welfare”, Philos Stud 56, 77–93.

Arnold, J. and Rodrigues, F. 2015. “Reducing Inequality and Poverty in Portugal”, Economics Department Working Papers No. 1258.

Arze, F. J., Martinez-Vazquez, J., and Mcnab, R. 2005. “Fiscal Decentralization and The Functional Composition of Public Expenditures”, Georgia State University: Andrew Young School of Policy Studies, International Studies Program, Working Paper 05-01 (Updated), September 2005.

Asghar, N., Awan, A., and Rehman, H. 2012. “Human Capital and Economic Gowth in Pakistan: A Cointegration and Causality Analysis”, International Journal of Economics and Finance, Vol. 4, No. 4.

Auerbach, A. J. 2012. “The Fall and Rise of Keynesian Fiscal Policy”, Asian Economic Policy Review, Vol. 7, Issue 2, pp. 157-175.

Bardhan, P. 2002. “Decentralization of Governance and Development”, Journal of Economic Perspectives, Vol. 16, Number 4, Pages 185-205.

Barro, R. J. 1989. “The Ricardian Approach to Budget Deficits”, Journal of Economic Perspectives 3, pp. 37-54.

Blackburn, M. L. 1994. “International Comparisons of Poverty,” The American Economic Review”, Papers and Proceedings of the Hundred and Sixth Annual Meeting of the American Economic Association, 84, 2, May 1994, pp 371-4.

Bourguignon, F. 2004 “The Poverty-Growth- Inequality Triangle”, paper was presented at The Indian Council for Research on International Economic Relations, New Delhi, on February 4, 2004.

Brosio, G. and Ahmad, E. 2006 “Uganda: Managing More Effective Decentralization”, IMF Working Paper No. 06/279.

Caminada, K. and Goudswaard, K. 2009 “Effectiveness of Poverty Reduction in the EU: A Descriptive Analysis”, Poverty and Public Policy, Vol. 1 (2): 5-5.

Cavusoglu, T. and Dincer, O. 2015 “Does Decentralization Reduce Income Inequality? Only in Rich States”, Southern Economic Journal 82 (1): 285- 306.

Celikay, F. and Gumus, E. 2017. “The Effect of Social Spending on Reducing Poverty”, International Journal of Social Economics, Vol. 44, Issue 5, pp. 620-632.

Christiano, L. J. and Fitzgerald, T. J. 2000. “Understanding the Fiscal Theory of the Price Level”, FRB Cleveland - Economic Review, 2000, v36 (2, Qtr-2), 2-37.

Chu, H. Y. 2000 “The Impacts of Educational Expansion and Schooling Inequality on Income Distribution”, Quertaly Journal of Business and Economics 39 (2): 39 – 49.

Devereux, M. B., Head, A. C., and Lapham, B. J. 2000. “Government Spending and Welfare with Returns to Specialization”, The Scandinavian Journal of Economics, Volume 102, No. 4 (Dec, 2000), pp. 547- 561.

Dwicaksono, A. and Fox, A. 2018. “Does Decentralization Improve Health System Performance and Outcomes in Low and Middle-IncomeCountries?ASystematic Review of Evidence from Quantitative Studies: Decentralization and Health System Performance and Outcomes”, Milbank Quartely 96 (2): 323-368.

Ezcurra, R. and Rodríguez-Pose, A. 2009. “Does Decentralization Matter for Regional Disparities? A Cross Country Analysis,”SERC Discussion Papers0025, Spatial Economics Research Centre, LSE.

Gadenne, L. and Singhal, M. 2014. “Decentralization in Developing Economies”, National Bureau of Economic Research, Working Papers 19402.

Gaspar, V., Amaglobeli, D., Garcia-Escribano, M., Prady, D., and Soto, M. 2019. “Fiscal Policy and Development: Human, Social, and Physical Investment for the SDGs”, IMF Staff Discussion Note SDN/19/03, Fiscal Policy and Development.

Goodin, R., Rice, J., Parpo, A., and Eriksson, L. 2008. Discretionary Time: A New Measure of Freedom, Cambridge University Press.

Halder, P. 2007. “Measures of Fiscal Decentralization”, Andrew Young Scholl of Policy Studies, Georgia State University.

Imide and Onokero, I. 2019. “The Impact of Fiscal Policy on Human Development Index: Empirical Evidence from Nigeria’s Democratic Era”, International Journal of Economics, Commerce and Management, United Kingdom, Vol. VII, Issue 2.

Jaya, W. K. 2021. Ekonomi Kelembagaan dan Desentralisasi, Gadjah Mada University Press.

Kaasch, A., Sumarto, M., and Wilmsen, B. 2018. “Indonesian Social Policy Development in a Context of Global Social Governance”, prepared for the UNRISD project, New Directions in Social Policy: Alternatives from and for the Global South.

Keynes, J. M. 1936. The General Theory of Employment, Interest and Money, reprinted in Keynes, Collected Writing, Vol. 6.

Lewis, G. W. and Ulph, D. T. 1988. “Poverty, Inequality and Welfare”, The Economic Journal, Vol. 98, Issue 390, 1 April 1988, pages 117-131.

Lustig, N., Pessino, C., and Scott, J. 2013. “The Impact of Taxes and Social Spending on Inequality in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay: Introduction to the Special Issue”, Commitment to Equity, Working Paper No. 13.

Martinez-Vazquez, J., Claus, I., and Vulovic, V. 2012. “Government Fiscal Policies and Redistribution in Asian Countries”, Economics Working Papers, Asian Development Bank.

Mehmood, R., Sadiq, S., and Khalid, M. 2010. “Impact of Fiscal decentralization on Human Development: A Case Study of Pakistan”, The Pakistan Development Review, Vol. 49, No. 4, Papers and Proceedings PARTS I and II The 26th Annual General Meeting and Conference of the Pakistan Society of Development Economist Islamabad, December 28-30,

(Winter 2010), pp 513-530. Muinelo-Gallo, L. and

Roca-Sagalas, O. 2013. “Economic Growth, Inequality and Fiscal Policies: A Survey of Macroeconomic Literature”, [S. I.]: Nova Science Publisher.

Republic of Indonesia. 2018. “Financial Note and State Budget 2018”, Jakarta: Republic of Indonesia.

Oates, W. 1972. “Fiscal Federalism”, New York: Harcourt Brace Jovanovich.

Oates, W. 1993. “Fiscal Decentralization and Economic Development”, National Tax Journal, Vol. 46. No. 2 (June, 1993), pp. 237-43.

Oates, W. 1999. “An Essay on Fiscal Federalism”, Journal of Economic Literature, Volume 37, Issue 3, 1120- 1149.

Odusola,A.2017.“FiscalSpace,Povertyand Inequality in Africa”, African Development Review, Vol. 29, No. S1, 2017, 1 – 14.

Ostwald, K., Tajima, Y., and Samphantharak, K. 2016. “Indonesia’s Decentralization Experiment: Motivations, Successes, and Unintended Consequences”, Southesat Asian Economies 33 (2): 139- 156.

Prud’homme, R. 1995. “The Dangers of Decentralization”, The World Bank Research Observer 10 (2): 201-220.

Rodriguez-Pose, A. and Gill, N. 2004. “Is There a Global Link between regional Disparities and Devolution?”, Environment and Planning Annual, Vol. 36, No. 12, pp. 2097-2117.

Sepulveda, C. F. and Martinez-Vazquez. 2011. “The Consequences of Fiscal Decentralization on Poverty and Income Equality”, Environment and Planning C: Government and Policy 2011, Volume 29, pages 321-343.

Shahzad, S. and Yasmin, B. 2016. “Does Fiscal Decentralization Matter for Poverty and Income Inequality in Pakistan?”, Pakistan Development Review 55 (4): 781-802.

Sinn, H. 1995. “A Theory of the Welfare State”, The Scandinavian Journal of Economics”, Vol. 97, No. 4, The Future of the Welfare State (Dec. 1995), pp. 495-526.

Sumarto, M. 2013. “Welfare Regime, Social Conflict, and Clientilism in Indonesia”, Phd Thesis, Australian National University.

Sumarto, M. 2017. “Welfare Regime Change in Developing Countries: Evidence from Indonesia”, Social Policy and Administration ISSN 0144-8896, DOI: 10.1111/spol. 12340, Vol. 51, No. 6, November 2017, pp. 940 – 959.

Sumarto, M. and Ferdiansyah, F. 2021. “Indonesia’s Social Policy Response to Covid-19: Targeted Social Protection Under Budget Constraints”, Covid-19 Social Policy Response Series. CRC 1342/No. 28.

Suryahadi, A., Febriany, V., and Yumma, A. 2017. “Expanding Social Security in Indonesia: The Current Processes and Challenges”, edited by I, Yi, 373-403, Basingstoke: Palgrave Macmillan.

Tanzi, V. 2000. “Fiscal Federalism and Decentralization: A Review of Some Efficiency and Macroeconomics Aspects”, In Proceeding of the Annual World Bank Conference on Development Economics, Chapter 11, pp. 231-263, Washington D. C., World Bank.

Tselios, V., Rodríguez-Pose, A., Pike, A. J., Tomaney, J., and Torrisi, G. 2011. “Income Inequality, Decentralisation and Regional Development in Western Europe”, CEPR Discussion Paper 8575.

Wallis, J. J. and Oates, W. 1988. “Decentralization in the Public Sector: An Empirical Study of State and Local Government”, A Chapter in Fiscal Federalism: Quantitative Studies, pp 5-32 from National Bureau of Economic Research, Inc.

Wren-Lewis, S. 2011. “Lessons from Failure: Fiscal Policy, Indulgence and Ideology”, National Institute Economic Review, Vol. 217, July 2011, pp. R31-R46.

DOI: https://doi.org/10.22146/jp.71691