The Effect of Regional Financial Performance on the Human Development Index (HDI) in Indonesia from 2020-2024

This study aims to analyze the effect of Financial Performance as measured by indicators of Regional Independence, Fiscal Decentralization, PAD Effectiveness, PAD Efficiency, and Regional Dependence on HDI (Human Development Index) in Indonesia in 2020-2024. The research approach uses a quantitative approach through panel data regression analysis with the Random Effect Model (REM) model. The test results of the R-Squared (R2) value were obtained at 0.672011 which indicated that the independent variables had an effect of 67.20% on the Human Development Index (HDI). Simultaneously, all independent variables have a significant effect on HDI in Indonesia. This is evidenced by the significance value of the F test <0.05. Fiscal Decentralization and PAD Effectiveness variables have a positive and significant effect on HDI because regions with good fiscal capacity and PAD realization tend to be able to improve public services which have a direct effect on HDI. Regional Dependency has a negative and significant effect because high fiscal dependency indicates that the region has not been able to explore the potential of PAD to the fullest and is still very dependent on transfers from the center. Meanwhile, Regional Independence and PAD Efficiency do not have a significant effect, because the contribution of PAD is still low and its management is not optimal. The results of the analysis are shown in the equation Yit = 79.2090888227 + 1.07163364014X1it + 9.17387358408X2it + 2.611663887X3it + 1.74707262942X4it - 9.49037067833X5it + ɛit. Regional independence, fiscal decentralization, effectiveness, and efficiency of PAD have a positive effect on HDI, which means that every 1% increase in these variables will increase HDI, while the variable that has the greatest influence is fiscal decentralization. Regional dependence on the central government has a negative effect, meaning that every 1% increase in regional dependence will reduce HDI achievement.