Fiscal Decentralization Impact on Government Size

Evidence From Indonesia

DOI

10.2991/978-94-6463-758-8_99How to use a DOI?

Keywords

Fiscal Decentralization; Revenue Decentralization; Expenditure Decentralization

Abstract

Fiscal decentralization has been implemented in Indonesia for more than two decades. This study, based on the Leviathan theory of Brennan and Buchanan, examines the impact of fiscal decentralization on government size. The Leviathan theory states that decentralization can lessen the central government’s propensity to collect taxes in excess. This study’s measurement of fiscal decentralization uses the variables of expenditure decentralization, revenue decentralization, and vertical imbalance as independent variables and government size as the dependent variable. This research uses panel data from 34 provinces in Indonesia from 2013 to 2023. The research uses secondary data from the Regional Revenue and Expenditure Budget (APBD) from the Directorate General of Financial Balance website. (DJPK). The impact of independent variables on the dependent variable is examined using the multiple linear regression analysis approach. Empirical results show that the variable of expenditure decentralization increases government size, while the variable of vertical imbalance decreases government size. This finding does not align with the Leviathan hypothesis, whereas revenue decentralization reduces government size, which aligns with the Leviathan hypothesis of Brennan and Buchanan.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Nadhira Afdalia
AU  - Basri Hasanuddin
AU  - Muhammad Yusri Zamhuri
AU  - Agussalim Agussalim
PY  - 2025
DA  - 2025/07/30
TI  - Fiscal Decentralization Impact on Government Size
BT  - Proceedings of the 9th International Conference on Accounting, Management, and Economics 2024 (ICAME 2024)
PB  - Atlantis Press
SP  - 1213
EP  - 1222
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-758-8_99
DO  - 10.2991/978-94-6463-758-8_99
ID  - Afdalia2025
ER  -