The Power Of Fiscal Desentralization To Overcome Inequality And Economic Growth In Sumatra

Introduction/Main Objectives: Inequality of per capita income in the uneven distribution of population is a social problem phenomenon that can have a negative impact on the economy in 10 provinces in the Sumatra region, which is a challenge for the regional government through fiscal decentralization policies in accordance with its authority. We continue to strive to strengthen the regulation and management of regional spending and tax revenues to overcome inequality and maintain economic growth in Sumatra. Background Problems: In the current era of regional autonomy, is the strengthening of fiscal decentralization that has been carried out sufficient to overcome these problems? Novelty: The existence of per capita expenditure variables and provincial minimum wages in the fiscal decentralization policy as control variables in this research. Research Methods: By using the IV-GMM method as an analytical tool, this research aims to extract the variables studied. Findings/Results: Strengthening fiscal decentralization through the role of regional spending has a significant positive relationship while economic growth has a negative and significant relationship to income inequality. Conclusion: Regional governments need to allocate regional spending of 3.88% to reduce income inequality while an increase in income inequality can slow economic growth by 7.95%.