TOWARDS A RESEARCH AGENDA FOR UNDERSTANDING LINK OF FISCAL DECENTRALIZATION TO POVERTY REDUCTION IN INDONESIAN

Abstract

Fiscal decentralization has been a popular topic for discussion in regards with development policy. Literature studies show that there are links between fiscal decentralization and poverty reduction. However, the links occurs in different ways among countries and local governments. Indonesia is a developing country that started its fiscal decentralization officially in January 2001.This study aims at observing the potential link patterns of fiscal decentralization to poverty reduction in Indonesian provinces before and in the period of fiscal decentralization implementation. This study applies a descriptive analysis as a method to identify the link pattern of fiscal decentralization to poverty reduction in Indonesian context. The link of fiscal decentralization to poverty reduction in Indonesia is elaborated using the share of government budget expenditure on relevant sector to total expenditure and the percentage rate of poverty. This study shows that there is no clear link pattern of fiscal decentralization to poverty reduction in  Indonesian context. Three links patterns, namely
positive link, negative link, and no link appear differently among provinces. Elaboration at the level of each province using various variables is needed in order to see the clearer link of fiscal decentralization to poverty reduction in Indonesian context.