There is an assumption that incumbent candidates often try maximizing their influence as the heads of regional government to increase their probability of being re-elected in the second period. Related to this assumption, this study examines the existence of local budget utilization behaviour by incumbents who have politically interested policies. This study also aims to analyse the probability of these incumbents of being re-elected. This study focuses on 254 provincial and districts/cities in Indonesia which held simultaneous regional head direct election in 2015 and examines regional heads’ fiscal policy and how it is induced by political motivation. It analyses certain expenditures such as budget deficits, total spending, and investment spending. The “other” budget category namely discretionary funds, with which regional officials have discretionary power to allocate and distribute, will also be observed. The funds consist of grants aid, social assistance expenditures, and financial aid. All these local government spending are examined, in particular related to the election year in 2015. According to the results obtained, there is no indication of politically driven fiscal policy by incumbent candidates in almost all spending categories. However, there is a positive and significant relationship between the regions that have incumbents and grant expenditure subcategory behaviour. This finding indicates that this subcategory expenditure is still popular among incumbents to stimulate citizens and gain sufficient vote-share later on. Surprisingly, the opposite effect of the cyclical behaviour appears in terms of the possibility of winning the election. The total expenditure disbursement policy around election year will be affect negative and significantly decrease the incumbents’ winning re-election.

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Rieger, Matthias
hdl.handle.net/2105/41659
Economics of Development (ECD)
International Institute of Social Studies

Priyono, Setyo Hari. (2017, December 15). Political Budget Cycles and the Indonesian Simultaneous Regional Direct Elections in 2015. Economics of Development (ECD). Retrieved from http://hdl.handle.net/2105/41659