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Abstract

This study aims to provide empirical evidences about the influence of fiscal decentralization on the level of corruption in regional governments of district and city in Indonesia and the role of natural resources in that influence. Panel data is used in this study with the observation period from 2008 to 2014 and 514 population from regency and city governments. As many as 433 observations from the final sample was taken based on the purposive sampling method. meanwhile, the hypothesis testing using partial least squares (PLS) structural equation modeling with WarpPLS. The results of the study found out that fiscal decentralization will increase the incidence of corruption in the district and city of regional governments. The second finding is that natural resources will increase the incidence of corruption when the regional autonomy system and fiscal decentralization are applied to local governments.

The Moderating Role of Natural Resources Between Fiscal Decentralization, Government Internal Audit, Law Enforcement and Corruption: Evidence from Indonesian Local Government

“…Decentralization is the handover of government affairs from the central or regional government at the top level to the regions to become their own household affairs (Aswar & Surbakti, 2013). District and city local governments are considered to be the right levels in managing and managing the resources submitted by the central government (Ulum et al 2019).…”

“…Indonesia is a country that has 34 provinces with different governmental conditions, rich natural resources and economic structures. Under these conditions, the government has made various efforts to be able to take advantage of its resources (Ulum et. Al., 2019).…”

“…But in fact, the resource sector and the state of the regions that are rich in resources are very vulnerable to acts of corruption (Zhan, 2017). According to Ulum et. al (2019), the abundance of natural resources is utilized by local officials to attract resource tenants to collaborate which can lead to massive acts of corruption.…”

“…As a result, when a region is granted the delegation of government power or fiscal decentralization and accompanied by an increase in the condition of natural resources owned by a region, it will actually reduce the level of corruption that occurs in that area. Ulum et al (2019) stated that natural resources can strengthen the effect of fiscal decentralization on the level of corruption. This is due to the agency theory in terms of devolving power to local governments to manage existing natural resources.…”

Effect of Fiscal Independence and Economic Growth on Reducing Poverty and Unemployment in Indonesia

“…Fiscal decentralization (Di et al, 2019;Qiao et al, 2019) is the effect of the implementation of regional autonomy policy. Fiscal decentralization aims to increase economic equity and avoid inequality between the central and local governments (Ulum et al, 2019;Wahyuningsih et al, 2019). The presence of fiscal decentralization has implications for wider regional authority in increasing regional economic growth (Gonschorek, 2021) and preventing inequality between regions in Indonesia (Lewis et al, 2020).…”