Agriculture Value Added and Environment Expenditures: are They Sustainable Pathways to Sustainable Revenues?

The study explores the link between agricultural value added and environmental expenditures to provincial governments' revenues. Due to data scarcity, this study investigates datasets pertaining to provinces from 2016 to 2020 in Indonesia. An instrumental variables 2SLS and OLS estimators ware employed to evaluate the datasets. The results of the study indicate that agricultural value added per person in the Indonesian agriculture sector do not contribute to the local government revenues. However, the study found that environmental spendings allocated by the local government contribute to higher revenues. From this perspective, there is urgency to modernize the agriculture-related sector with environmental expenditures so that it will contribute more to the local government revenues, thereby advancing the city's economic and social development goals. By this finding, the governments are encouraged to seek strategies to prevent the squandering of agricultural-related sectors, enabling them to contribute to the country's long-term SDGs goals.