Fiscal decentralisation and capital expenditure composition of regional government in Indonesia

摘要

This study analyses the impact of fiscal decentralisation on the composition of regional government spending using unbalanced panel data of districts and cities in Indonesia during 2011-2015. Fiscal decentralisation, in terms of spending, increases the composition of capital expenditure in traditional infrastructure that give Indonesian comparative advantages in international trade. However, its also decreases the composition of capital expenditure in human capital infrastructure. Therefore, the local governments must keep maintaining a reasonable spending for human capital infrastructure to improve its quality and increase the competitiveness of Indonesian human resources for facing the era of free trade and labour mobility.