The Impact of Local Budget Efficiency on Sustainable Economic Growth: Panel Data Evidence from Jambi Province, Indonesia
DOI:
https://doi.org/10.24269/ekuilibrium.v21i2.2026.pp446-458Keywords:
Jambi’s economic growth, Local budget efficiency, Panel DataAbstract
Budget efficiency is an important issue in local government financial management, particularly in regions where fiscal resources are
limited and development needs continue to increase. This study analyzes the relationship between local budget efficiency and regional economic growth in Jambi Province, Indonesia. The analysis covers 12 local governments, comprising the provincial government, nine regencies, and two cities, over the 2018–2024 period. Using 84 observations, this study employs panel data regression with a fixed-effects model. The analysis includes the Efficient Spending Ratio (ESR), Capital Expenditure Ratio (CER), and Fiscal Independence Ratio (FIR), while population and the regional minimum wage are included as control variables. The estimation results show that ESR has a positive and significant relationship with regional economic growth. CER and FIR also show positive and significant relationships, with coefficients of 0.087 (p = 0.007) and 0.029 (p = 0.042), respectively. In contrast, population has a negative and significant relationship with economic growth, while the regional minimum wage has a positive and significant relationship. The fixed-effects model produces an R-squared value of 0.721 and an adjusted R-squared value of 0.681. These results indicate that the quality of local expenditure management and the capacity of local governments to manage their fiscal resources are relevant to regional economic performance. The findings suggest that local governments need to pay greater attention to spending efficiency, productive capital expenditure, and fiscal capacity when formulating regional development policies.
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