The Effect of Regional Original Income and Balancing Funds on Capital Expenditures and Their Impact on Economic Growth (Case Study in Pemerintahan Kabupaten/Kota in Jawa Timur))

Abstract

Regional autonomy gives authority to Regional Government to regulate its own economic growth. It requires the Regional Government to be wiser in exploring its potential Regional Original Income. Regional Government has different financial ability, therefore the Central Government gives Balance Income to cover the discrepancies for the implementation of Regional Autonomy. Economic growth indicates the extent to which economic activity will generate additional income for society in a certain period. The indicator to measure economic growth is the value of Gross Regional Domestic Product. The aim of this study is to determine the effect of Local Own Revenues and Balancing Funds toward Economic Growth either directly or indirectly through Capital Expenditure.

This study used quantitative approach by statistic descriptive method. The data that had been used was secondary data in the form of budget realization report and economic growth report from 38 districts/ cities in East Java area in the year of 2010-2015 with 228 samples. The result of this study that Local Own Revenues had direct positive effect and significant toward Economic Growth and also indirectly had insignificant impact toward Economic Growth through Capital Expenditure, Balancing Fund directly had negative effect and significant toward Economic Growth and also indirectly had insignificant effect toward Economic Growth through Capital Expenditure, and also Capital Expenditure had negative and insignificant effect toward Economic Growth.