Social Transfers and Fiscal Resilience in Resource-Dependent Regions:Dynamic Evidence from Indonesia’s Nickel Economy
DOI:
https://doi.org/10.26811/peuradeun.v14i3.2899Keywords:
Dynamic Panel System GMM, Fiscal Resilience, Inflation, Local Tax, Social AssistanceAbstract
Fiscal capacity in natural resource-dependent regions is often constrained by fiscal persistence, structural inequality, and economic shocks. This study examines whether social assistance strengthens local fiscal capacity through local tax revenue while controlling for inflation and fiscal persistence. Using balanced panel data from 17 districts/municipalities in Southeast Sulawesi, Indonesia, for 2014–2023, the study applies two-step System GMM with Windmeijer-corrected standard errors to address dynamic persistence and potential endogeneity. The final estimation comprises 136 observations and 12 internal instruments. The results show that lagged local tax revenue positively and significantly affects current tax revenue (β = 0.3401; p < 0.001), confirming fiscal persistence. Social assistance also has a positive and significant association with local tax revenue (β = 0.0706; p = 0.0186), suggesting that social transfers may strengthen fiscal capacity through household purchasing power and local economic activity. Inflation is positively associated with local tax revenue (β = 0.0524; p = 0.0086), indicating nominal expansion of the tax base rather than necessarily improved real fiscal capacity. The study contributes by conceptualizing social assistance as a potential component of fiscal resilience, with implications for integrating social protection, local economic development, and tax administration in resource-dependent regions.
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