Khairul Amri, Raja Masbar, B.S. Nazamuddin, Hasdi Aimon
Our research study aims to analyze the effect of government expenditure on goods and services and capital toward regional economic growth in Indonesia. We position local tax effort as a moderating variable between economic growth and government expenditures. Using a panel data set of 24 provinces in Indonesia from 2006 to 2015, a dynamic model of GMM was applied to estimate the effect of public expenditure on growth. The research study provides empirical evidence that the two kinds of public spending positively and significantly affect economic growth. Conversely, local tax efforts negatively affect economic growth. Besides, local tax efforts also reduce the positive impact of capital expenditure on economic growth. In other words, local tax efforts negatively moderate the influence of government expenditure on the output growth of the regional economy. Copyright © 2023 Khairul Amri, Raja Masbar, B. S. Nazamuddin, Hasdi Aimon. Published by Vilnius University Press.
Faculty of Islamic Economics and Business, Universitas Islam Negeri Ar-Raniry, Banda Aceh, Indonesia; Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh, Indonesia; Faculty of Economics, Universitas Negeri Padang, Padang, Indonesia
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