Can Funding Decentralization Influence The Local Economic Growth?


1 Faculty of Economics, Universitas Negeri Surabaya, Indonesia.

2 Faculty of Economics, Universitas Islam Mojopahit, Mojokerto, Indonesia.


Experiences often by many countries slowing economic growth as a result of central government-centered funding policies. The concern about slowing economic growth is motivating the need for a decentralized policy in development funding to foster economic growth. The research aims to describe the policy influence of the decentralization of funding sources between central and local governments to foster economic growth in East Java. This research method uses an explanation design with a quantitative approach. Data panels are collected from 38 cities/counties among 2009 to 2018 years, in East Java, with analysis using regression technique with SPSS version 23. The results of this study showed that decentralization of funding sources can increase significantly on local economic activities and affect the increase of local economic growth. Increasing local economic activity can significantly increase economic growth. While local growing of economics can significantly increased on welfare for society in East Java. These findings remind the importance of the policy that decentralized funding will contribute positively to the growth of local economies.  More importantly, if the local government in total regulates the sources of fiscal income and effective expenditure, decentralized funding will be able to encourage the growth of the local economy, which will eventually improve the welfare of the people in East Java.