Fiscal Illusion Detection and the Effect on Capital Expenditure, Fiscal Decentralization, Economic Growth, and Human Development Index for District/Cities in Bali Province

Abstract

Fiscal decentralization has increased the Local Revenue but allegedly still many governments prefer to suspend the local expenditure financing at matching grant. This study purpose is to obtain empirical evidence the phenomenon of fiscal illusion with income approach (revenue enhancement), and also to obtain empirical evidence the effect of Fiscal Decentralization on Capital Expenditure, Economic Growth, and Human Development Index for district/cities in Bali Province. Multiple regression analysis with SPSS V.20 software was used to test the phenomenon of fiscal illusion and research hypotheses. The results showed that there is no fiscal illusion in expenditure financing for district/cities in Bali Province. Also found that: 1) Fiscal Decentralization has no effect on Capital Expenditure, Economic Growth, and Human Development Index, 2) Fiscal Decentralization affect on Capital Expenditure, Economic Growth, and Human Development Index for districts/cities with level of financial independence below the average in Bali Province, 3) Fiscal Decentralization affect on Capital Expenditure, Economic Growth, and Human Development Index for districts/cities with financial independence level above average in Bali Province.

Keywords: fiscal illusion, local revenues, general allocation fund, local expenditure, capital expenditures, economic growth, human development index