Efficiency Analysis of Regional Government Expenditure on Development: Evidence from Indonesia

Abstract Regional governments are expected to be able to focus more on improving the welfare of the community in optimizing government administration in each region. This study aims to identify the factors that influence regional development as indicated by the human development index in that region. This study analyzes the efficiency level, productivity level, trade openness, degree of fiscal autonomy (DFA), and democracy on regional development in Indonesia during the period 2016-2020. The effectiveness and efficiency of government budget functions were evaluated using Data Envelopment Analysis. The research model was evaluated using panel data regression with E-views. Trade openness and Indonesian Democracy Index have a positive and insignificant effect on Regional Development. The Degree of Fiscal Autonomy has a negative and insignificant effect on Regional Development. Thus, the government needs to focus on the efficiency of budget use and democracy in its region in order to optimize regional development. This research also indicates that the level of the Degree of Fiscal Autonomy in a region must be managed properly. DFA that is too high can reduce the achievement of regional development in general. Thus, governments have to pay attention to elevate the degree of fiscal autonomy given to each region to spur economic growth.