The Effect of Fiscal Decentralization on Economic Growth

This research paper is to examine the impact of fiscal decentralization on economic growth in 19 provinces covering 180 districts in Indonesia with focusing fiscal decentralization after being formulated Law No.25/1999, which was implemented in 2001. Using panel model to investigate this relationship, we find that the relationship between fiscal decentralization either from local government expenditure or general allocation fund is positive effect after three years implementation Law 22/1999 and Law 25/1999 however, the impact is very small.