REVENUE-SHARING FUND AND PERFORMANCE OF LOCAL GOVERNMENTS

Abstract

This study examines the relationship between revenue sharing funds and local government performance in Indonesia. The sample included 481 local governments in 2016. The results of this study provide the following empirical evidence. First, local governments that experience high (low) dependence on revenue sharing funds are local governments that achieve low (high) performance. Second, the increase in local government revenue-sharing funds has an impact on improving the performance of regional governments. Third, the negative relationship between dependence on revenue sharing funds and local government performance is more evident for local governments in the relatively low-performance group. Likewise, the relationship between increased revenue sharing and improved performance is stronger for local governments in the relatively low-performance group. These results suggest the role of performance levels in determining policy on revenue sharing funds and their relation to the performance of local government administration.

Keywords

• revenue-sharing funds
• performance
• local government
• region