ABSTRACT

POLITICAL AND SOCIO-ECONOMIC FACTORS BEHIND BUDGET DEVIATION IN THE INDONESIAN LOCAL GOVERNMENT’S ELECTORAL CYCLE

Daniyah Ainur Rossa
F1315027

This research examines factors behind budget deviation in the Indonesian local government’s electoral cycle. By using 1172 unbalanced panel data on 393 local governments in two election years (2013 and 2015), four political factors and three  socio-economic  factors  are  tested  on  the  local  government’s  budget deviation. The findings show that only electoral cycle affect the total budget in general. On separated test run on revenue deviation and expenditure deviation, it is found that three factors affect both revenue deviation and expenditure deviation, they are the electoral cycle, population, and income per capita (IPC). Political alignment and unemployment rate only show an effect on expenditure deviation, while political coalition and political competition do not seem to show an effect on both models tested. The only factor that has consistent result both in main test or separated test is the electoral cycle. Thus, this research provides empirical evidence supporting the findings on the relationship between electoral cycle and budget deviation.

Keywords: budget deviation, electoral cycle, political coalition, political competition, political alignment, population, IPC, unemployment