REGIONAL REVENUES AND HUMAN DEVELOPMENT INDEX: AN EMPIRICAL EVIDENCE FROM INDONESIA

Resumo

Human development is a central indicator of regional well-being and plays a critical role in assessing the effectiveness of
public policies; therefore, this study investigates the relationship between local government revenues and the Human
Development Index (HDI) in Indonesia. Using panel data from 538 to 541 local governments observed during 2014–
2016, the analysis examines both the overall HDI and its core dimensions of long and healthy life, knowledge, and
standard of living. HDI data were obtained from the Central Statistics Agency, while revenue variables were sourced
from the Directorate General of Fiscal Balance. Regression estimations reveal that local original income (PAD) and special
allocation funds (DAK) exhibit positive associations with HDI and its dimensions. In contrast, general allocation funds
(DAU) and revenue sharing funds (DBH) show negative relationships with HDI outcomes. These findings indicate that
regions with stronger fiscal independence tend to achieve higher human development outcomes, whereas dependence
on general transfers may reflect structural underdevelopment or inefficiencies in fund utilization. The study highlights
the importance of strengthening local fiscal capacity and improving the effectiveness of intergovernmental transfers to
enhance regional human development