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INTERREGIONAL ALLOCATION OF RESOURCES: THE CASE OF INDONESIA
Author(s) -
Azis Iwan J.
Publication year - 1992
Publication title -
papers in regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.937
H-Index - 64
eISSN - 1435-5957
pISSN - 1056-8190
DOI - 10.1111/j.1435-5597.1992.tb01855.x
Subject(s) - equity (law) , economics , resource allocation , capital allocation line , microeconomics , profit (economics) , market economy , political science , law
This paper presents a simultaneous model of central‐regional transfers based on a combined supply and demand‐side framework. The model is designed specifically to evaluate the impacts of selected allocation criteria associated with such government transfers. As an application, the model is used for evaluating the allocation criteria for INPRFES, which is one of the most important central‐regional transfers in Indonesia. Results of the simulation indicate that regional capital growth is significantly affected by the transfers. It is also revealed that, despite the fact that the system of allocation used in the early 1980s is classified nonoptimal when viewed in terms of interregional equity, it still yields better outcomes than the currently adopted equi‐size principle. The existence of a trade‐off between maximizing growth of total GRDP and reducing interregional disparity is also revealed by the model simulation.