Local Own-source Revenue and Balance Fund on Economic Growth: Remaining Budget Surplus, and Capital Expenditure as an Intervening Variable

Abstract

This study aimed to determine and analyze local own-source revenue and balance funds on economic growth mediated by the remaining budget surplus and capital expenditure. The sample was taken from the reports of Local Own-Source Revenue (LOSR) realization, Balance Fund (BF) realization, Remaining Budget Surplus (RBS) realization, Capital Expenditure (CE) realization, and Gross Regional Domestic Product (GRDP) in 34 regencies/cities of North Sulawesi Province, Central Sulawesi Province, and Gorontalo Province for five years from 2015 to 2019. The statistical analysis tool used was path analysis with Lisrel application to test the effect of Local Own-Source Revenue (LOSR) and Balance Fund (BF) on economic growth mediated by the Remaining Budget Surplus (RBS) and Capital Expenditure (CE) as a mediation variable. This study showed that local own-source revenue, balance fund, remaining budget surplus, and capital expenditure simultaneously or partially had a positive effect on economic growth. However, the balance fund variable had a negative effect on the remaining budget surplus, while capital expenditure and remaining budget surplus were able to mediate the relationship between local own-source revenue and balance funds to economic growth.