Title:
FLYPAPER EFFECT IN INDONESIAN MUNICIPAL GOVERNMENTS’ EXPENDITURES

Authors:
Ika Wulandari and Evi Gantyowati

Abstract:
This study seeks to test the flypaper effect in Indonesian municipal governments’ expenditures from 2014 to 2008 by comparing municipalities (cities/ regencies) with increasing municipal own-source revenues with those of which municipal own-source revenues decline. Our dependent variable is an increase in municipal expenditures, while the independent variables are increases in municipal own source revenues and unconditional grants. We analyze the panel/ pooled data by combining the 2014- 2018 time-series data and cross-section data from several Indonesian municipalities. This study employs the panel data regression with the Fixed Effect Model. The results indicate the flypaper effect in Indonesian municipals’ expenditures, no flypaper effect in the local expenditures of municipals with continuously increasing PAD, and the flypaper effect in the local expenditures of municipals with decreasing PAD.

Keywords:
flypaper effect, municipal expenditures, municipal own-source revenues, unconditional grants

DOI:
http://dx.doi.org/10.37500/IJESSR.2021.4332