The Influence of Local Government Expenditure Realization on Economic Growth and its Impact on HDI

This study aims to analyse the impact of actual expenditure on education, health and economic functions on the Human Development Index (HDI) through economic growth in 33 districts in the 3T regions, as defined by Presidential Regulation No. 63 of 2020, excluding new autonomous regions for the period 2014–2024. Using path analysis, this study applies a four-year time lag to expenditure variables to capture the long-term impact of the budget. This study employs a quantitative approach using panel data regression with a Fixed Effects Model (FEM) for the first substructure and a Random Effects Model (REM) for the second substructure. The results indicate that only health expenditure has a significant direct positive effect on the HDI. Conversely, economic expenditure has a significant negative effect, whilst education expenditure shows no significant effect on the HDI. These findings demonstrate that improvements in the HDI remain dependent on interventions involving free healthcare services. Meanwhile, economic and education expenditure remains hampered by issues of accessibility, budgetary inefficiencies, and the quality of education itself. The failure of this mediating function demonstrates that economic growth is merely a statistic if its benefits in improving decent living standards and equity are not realised.