Fiscal Effectiveness and Efficiency in Driving Regional Economic Development: Evidence from Banten Province

Budi Prajogo; Farhat Abas

doi:10.70716/emis.v4i2.531

Authors

Budi Prajogo Department of Accounting, Sekolah Tinggi Ilmu Ekonomi Ganesha, South Tangerang, Indonesia Author
Farhat Abas Department of Management, Sekolah Tinggi Ilmu Ekonomi Ganesha, South Tangerang, Indonesia Author

DOI:

https://doi.org/10.70716/emis.v4i2.531

Keywords:

Expenditure Effectivenes, Expenditure Efficiency, Economic Development, Regional Public Finance, APBD

Abstract

This study examines the effect of expenditure effectiveness and efficiency on regional economic development in Banten Province. The research addresses a key issue in public financial management concerning how regional budgets can be optimally allocated and utilized to maximize development outcomes. A quantitative approach is applied using multiple linear regression based on regional budget data and economic indicators from official government sources for the period 2015–2023. The regression results indicate that expenditure effectiveness positively and significantly affects economic development (β = 0.052; p = 0.013), while expenditure efficiency also demonstrates a positive and significant influence (β = 0.038; p = 0.020). Simultaneously, both variables significantly explain regional economic growth (F = 19.72; p = 0.002), with a coefficient of determination (R²) of 0.842, indicating strong explanatory power. These findings imply that improving budget absorption, strengthening implementation efficiency, and adopting evidence-based planning are essential to enhance regional development performance. The study recommends reinforcing value-for-money principles and accelerating financial digitalization to improve public expenditure quality.

References

Abdillah, K., Maulana, A., & Aminatuzzuhro. (2024). Determinants of Indonesia’s regional economic growth during the era of regional autonomy. Jurnal Ekonomi Pembangunan, 21(2). https://doi.org/10.22219/jep.v21i02.27934

Adhim, M. A., Dewi, M. W., & Pravasanti, Y. A. (2023). Analisis pengaruh pendapatan daerah, belanja daerah, dan pembiayaan daerah terhadap laju pertumbuhan PDRB. Jurnal Ilmiah Keuangan Akuntansi Bisnis, 3(2). https://doi.org/10.53088/jikab.v3i2.85

Anwar, S., & Nguyen, L. T. P. (2021). Government expenditure efficiency and economic growth in developing economies: A panel data analysis. Journal of Asian Economics, 74, 101310. https://doi.org/10.1016/j.asieco.2021.101310

Badan Pusat Statistik Provinsi Banten. (2023). Banten dalam angka 2023. BPS Provinsi Banten.

Badrudin, R. (2011). Effect of fiscal decentralization on capital expenditure, growth, and welfare. Economic Journal of Emerging Markets, 3(3), 211–223. https://doi.org/10.20885/ejem.v3i3.2974

Creswell, J. W., & Creswell, J. D. (2018). Research design: Qualitative, quantitative, and mixed methods approaches (5th ed.). Sage Publications.

Farida, N., Suman, A., & Sakti, R. K. (2021). Fiscal decentralization, economic growth and regional development inequality in Eastern Indonesia. Journal of Indonesian Applied Economics, 9(2), 1–9. https://doi.org/10.21776/ub.jiae.2021.009.02.1

Firdaus, M. A., & Suseno, D. A. (2025). Pengaruh pengeluaran pemerintah terhadap investasi dan PDRB di Indonesia. EKOMA: Jurnal Ekonomi, Manajemen, Akuntansi, 4(4), 7243–7262. https://doi.org/10.56799/ekoma.v4i4.9537

Ginting, A. M., Hamzah, M. Z., & Sofilda, E. (2019). The impact of fiscal decentralization on economic growth in Indonesia. Economic Journal of Emerging Markets, 11(2), 152–160. https://doi.org/10.20885/ejem.vol11.iss2.art3

Hamdani, I., Nesta, N. S., Rahmawati, J., & Hidayat, F. (2023). Pengeluaran pemerintah untuk pembangunan daerah. Wawasan: Jurnal Ilmu Manajemen, Ekonomi dan Kewirausahaan, 1(3), 187–203. https://doi.org/10.58192/wawasan.v1i3.902

Haq, F. A., Wati, L. N., & Istianda, M. (2023). The role of capital expenditure allocation in mediating regional financial performance on regional economic growth Aceh Province. Journal of Social Entrepreneurship Theory and Practice, 2(1), 27–41. https://doi.org/10.31098/jsetp.v2i1.1593

Haryanto, J. T., & Tenrini, R. H. (2021). Study of fiscal decentralization, macroeconomic stability and regional growth in Indonesia. Jurnal Perspektif Pembiayaan dan Pembangunan Daerah, 9(3). https://doi.org/10.22437/ppd.v9i3.12157

Haryati, D. C., Nurpiji, N., Masitoh, G., Saputra, W., & Subarkah, T. (2025). Analisis efisiensi belanja modal terhadap pertumbuhan ekonomi daerah di Indonesia: Pendekatan data panel. GEMILANG: Jurnal Manajemen dan Akuntansi, 5(3), 139–153. https://doi.org/10.56910/gemilang.v5i3.2185

Hayati, J., Pradani, T., & Tirtana, D. (2024). The moderation role of budget ratcheting: The relationship between fiscal decentralization and regional spending. Equity: Jurnal Ekonomi, 11(2), 80–93. https://doi.org/10.33019/equity.v11i2.191

Heru Akhmadi, M., & Sumardjoko, I. (2018). The implications of local government spending efficiency on the regional economic performance. Proceedings of the 2nd International Conference on Indonesian Economy and Development (ICIED 2017). https://doi.org/10.2991/icied-17.2018.3

Ishak, J. F. (2021). The impact of regional government financial performance on capital expenditure. Jurnal ASET (Akuntansi Riset), 13(2), 211–219. https://doi.org/10.17509/jaset.v13i2.35903

Latifa, A., Frinaldi, A., Magriasti, L., & Naldi, H. (2025). Desentralisasi fiskal: Tantangan pengelolaan pengeluaran daerah dalam mewujudkan otonomi keuangan daerah. Jurnal Manajemen dan Ilmu Administrasi Publik (JMIAP), 7(3), 411–417. https://doi.org/10.24036/jmiap.v7i3.1237

Mariana, D., & Rusmana, O. (2022). Fiscal decentralization and regional development disparity in Indonesia: The role of expenditure quality. Jurnal Bina Praja, 14(2), 255–272. https://doi.org/10.21787/jbp.14.2022.255-272

Nur Hanifah, F., & Winarna, J. (2024). The effect of financial performance and budget ratcheting on capital expenditure allocation in districts/cities of Central Java Province. Journal of Economics, Finance and Management Studies, 7(2). https://doi.org/10.47191/jefms/v7-i2-05

Paidi, Sirojuzilam, Lubis, S., & Purwoko, A. (2025). Efficiency analysis of regional government expenditure on development: Evidence from Indonesia. ECONOMICS, 13(3), 105–124. https://doi.org/10.2478/eoik-2025-0058

Patty, Y. B. Z., & Kartika, T. P. D. (2025). The critical role of financial performance in shaping capital expenditure decisions. Reviu Accounting, Business & Organizations, 1(1), 82–92. https://doi.org/10.64417/rabo.v1i1.m5devc08

Prasetyo, A., & Wahyu, D. (2023). Human development index, regional expenditure, and poverty: Dynamic panel evidence from Indonesian provinces. International Journal of Economics and Finance, 15(4), 33–45. https://doi.org/10.5539/ijef.v15n4p33

Rahmawati, F., & Handayani, S. (2023). Analisis kinerja keuangan pemerintah daerah berbasis konsep value for money di Indonesia. Jurnal Akuntansi dan Keuangan Indonesia, 20(1), 1–18. https://doi.org/10.21002/jaki.2023.01

Saunders, M. N., & Lewis, P. (2019). Research methods for business students (8th ed.). Pearson.

Sofilda, E., Hamzah, M. Z., & Kusairi, S. (2023). Analysis of fiscal decentralisation, human development, and regional economic growth in Indonesia. Cogent Economics & Finance, 11(1). https://doi.org/10.1080/23322039.2023.2220520

Susi, Astuti, & Mispiyanti, M. (2020). Effects of regional government financial performance on economic growth, unemployment, poverty, and human development index. Jurnal RAK (Riset Akuntansi Keuangan), 5(1), 1–17. https://doi.org/10.31002/rak.v5i1.2714

Syahrimi, Hidayat, A., & Yulianita, A. (2024). Fiscal decentralization, monetary policy, and economic growth in Indonesia: A panel data analysis. Jurnal Perspektif Pembiayaan dan Pembangunan Daerah, 13(4). https://doi.org/10.22437/ppd.v13i4.42111

Zein, M. H. M., & Septiani, S. (2024). The effect of financial performance on capital expenditure, economic growth, human development index, and poverty. Quality-Access to Success, 25(200), 180–195. https://doi.org/10.47750/QAS/25.200.20

Zein, M. H. M., Muhtarom, M. M., Mulyadi, M. M., & Septiani, S. (2024). Examining the role of local government's financial performance and capital expenditure in increasing economic growth in Banten Province, Indonesia (2018–2022). Journal of Risk and Financial Management, 17(10), 456. https://doi.org/10.3390/jrfm17100456