Fiscal Independence, Local Revenue Effectiveness, and Readiness for Mandatory Spending: Evidence from Local Governments in South Sulawesi, Indonesia
DOI:
https://doi.org/10.59890/ijfbm.v4i5.31Keywords:
Fiscal Independence, Mandatory Spending, Personnel Expenditure, Flypaper Effect, Panel DataAbstract
This study examines whether fiscal independence, revenue effectiveness, and dependence on the General Allocation Fund (DAU) relate to the position of local governments against the mandatory spending thresholds of Law No. 1 of 2022. It uses a panel of 24 regencies and cities in South Sulawesi for 2019 to 2024 and estimates random effects models with cluster-robust inference and eight robustness checks. Under proxy measures, no local government reached the 40 percent infrastructure floor in any year, and at most two met the 30 percent personnel cap. Higher DAU dependence is associated with a higher personnel share and a lower infrastructure share, but these associations lose significance under two-way fixed effects. Fiscal independence and revenue effectiveness show no significant association.
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