The Effect Original Local Revenue (PAD) and General Allocation Fund (DAU) on Local Expenditure (BD) and Flypaper Effect Phenomenon In Regencies / Cities In South Kalimantan Province

Abstract

The background of this research is the implementation of fiscal decentralization by giving authority to manage the regions and manage regional finances independently. This implementation will make the regions be more independent to look for regional revenue resources and reduce dependence on the allocation of funds from the center of government. There two objectives in this research. First, to find out the effect of Original Local Revenue (PAD) and the General Allocation Fund (DAU) on Local Expenditure (BD) which are obtained simultaneously or partially in the Regency / City of South Kalimantan Province. Second objective is to test and analyze whether the flypaper effect occurs in the Regencies / Cities of South Kalimantan Province. This study uses panel data covering 13 districts / cities in South Kalimantan and the observation period of 2004 - 2017. The data analysis techniques uses panel data regression. Meanwhile, the Chow test and Hausman test aim to determine the best model. The result of this research shows that the best model is Random Effect Model (REM). It is based on the Chow test and the Hausman test. The first hypothesis of REM model states that the General Allocation Funds have effects on Local Expenditures.. Furthermore, partially the Local Original Revenue and General Allocation Funds significantly influences Local Expenditures can be received. The flypaper effect occurs in the Regency / City of South Kalimantan Province. It can be seen from the magnitude of the coefficient of the General Allocation Fund which is compared to the Original Local Revenue. Thus, it detects waste due to the fact that the General Allocation Fund is sourced from the central allocation, which means the region is not independent.