Intergovernmental Fiscal Transfers and Local Incentives and Responses: The Case of Indonesia*

Blane D. Lewis, Paul Smoke

Research output: Contribution to journalArticle

Abstract

Indonesian policymakers are convinced that a number of perverse incentives are embedded in their system of intergovernmental transfers. Officials in countries throughout the developing world have similar views about their own intergovernmental frameworks. In Indonesia, perverse incentives are thought to negatively influence a wide range of local government fiscal behaviours, including as regards own-source revenues, spending and savings. An empirical analysis of the local government response to transfers, however, offers only mixed support for the existence and strength of the presumed incentives. Overall, the findings in this paper highlight the benefits to central governments of rigorously examining assumed perverse incentives in their intergovernmental frameworks before embarking on attempts to expunge them.

Original languageEnglish (US)
JournalFiscal Studies
DOIs
StateAccepted/In press - 2017

Fingerprint

Indonesia
Fiscal transfers
Incentives
Local government
Revenue
Empirical analysis
Fiscal
Savings
Intergovernmental transfers
Developing world
Central government
Politicians

Keywords

  • H3
  • H7
  • Incentives
  • Indonesia
  • Intergovernmental fiscal transfers
  • Local public finance
  • R5

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Intergovernmental Fiscal Transfers and Local Incentives and Responses : The Case of Indonesia*. / Lewis, Blane D.; Smoke, Paul.

In: Fiscal Studies, 2017.

Research output: Contribution to journalArticle

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