Open Journal Systems

Analysis of the Influence of the Degree of Fiscal Decentralization, Balancing Funds, and Economic Growth on the Islamic Human Development Index (I-HDI) in 8 Provinces in Indonesia

Sigit - Pramono, Imam Kanafi, Hendri Hermawan Adinugraha, Rizky Andrean

Abstract

This study aims to analyse the influence of the degree of fiscal decentralization, balancing funds, and economic growth on the Islamic Human Development Index (I-HDI) in eight provinces in Indonesia with the lowest I-HDI scores. To fill the research gap, these provinces were categorised based on I-HDI intervals. This study contributes in addressing empirical gaps by focusing on the regions that have received limited attention in the context of Islam-based human development, as well as substantive gaps by integrating variables of fiscal decentralization and balancing funds that have rarely been directly examined in relation to the I-HDI. Methodologically, the System Generalised Method of Moments (System-GMM) approach is applied to address potential endogeneity and the dynamic nature of panel data. A region’s capacity to finance public expenditure is reflected in the degree of fiscal decentralization, while balancing funds serves as the main source for financing public welfare. Although economic growth is generally expected in enhancing welfare, it may exacerbate social inequality if not accompanied by inclusive policies and equitable distribution. The results of this study indicate that the degree of fiscal decentralization has no significant effect on I-HDI in either the short or long term. Conversely, balancing funds has a significantly negative impact, reflecting allocative inefficiency. Economic growth also negatively affects the I-HDI across both time horizons, indicating that its benefits are not evenly distributed. These findings emphasise the need for comprehensive policy evaluation to improve resource allocation efficiency and promote equitable and sustainable human development in line with the principles of Maqasid al-Shariah (Sharia principles).

Keywords

Islamic Human Development Index; Degree of Fiscal; Decentralization; Balancing Funds; Economic Growth; Generalized Method of Moments.

References

Ali, F. (2020). Measurement Method for Islamic Human Development Index. Journal of Economics and Finance (IOSR-JEF), 11(6), 1–7. https://doi.org/10.9790/5933-1106010107

Ansori, W., & Muthmainah, M. (2019). Fenomena Flypaper Effect atas Belanja Daerah Pemerintah Kabupaten/Kota di Pulau Bali dan Nusra. Jurnal Akuntansi Dan Bisnis, 18(2), 151. https://doi.org/10.20961/jab.v18i2.389

Badan Pusat Statistik Indonesia. (2024). Data Indeks Pembangunan Manusia Menurut Provinsi Tahun 2018-2023. Badan Pusat Statistik Indonesia.

Badan Pusat Statistk Indonesia. (2024). Data Indeks Pembangunan Manusia Di Indonesia Tahun 2018-2023. Badan Pusat Statistk Indonesia.

Banerjee, P., & Choudhury, S. (2020). Agent Based Computational Model Aided Approach to Improvise the Inequality-Adjusted Human Development Index (IHDI) for Greater Parity in Real Scenario Assessments. 6. http://arxiv.org/abs/2010.03677

Barro, R. J., & Sala-i-Martin, X. (2004). Economic Growth. In International Encyclopedia of the Social & Behavioral Sciences: Second Edition. https://doi.org/10.1016/B978-0-08-097086-8.71057-9

Belanes, A., Saâdaoui, F., & Abedin, M. Z. (2024). Potential diversification benefits: A comparative study of Islamic and conventional stock market indexes. Research in International Business and Finance, 67(August 2023). https://doi.org/10.1016/j.ribaf.2023.102098

Chapra, U. (2000). Islam Dan Pembangunan Ekonomi (I. Abidin Basri (ed.)). Gema Insani Press.

Dasgupta, P., & Weale, M. (1992). On measuring the quality of life. World Development, 20(1), 119–131. https://doi.org/10.1016/0305-750X(92)90141-H

Dwi Lestari, & Nur Azlia Arumi. (2024). Factors that influence the Islamic Perspective Human Development Index as Evidence of the Development of the Muslim Community. Journal of Lslamic Economics and Bussines Ethics, 1(2), 75–93. https://doi.org/10.24235/jiesbi.v1i2.133

Hajrina, N., & Jatmiko, W. (2015). Between Sharia Maqasid Index and Human Development Index: Which One is Happier? Media Syari’ah, 19(2), 319–355. http://jurnal.ar-raniry.ac.id/index.php/medsyar/article/view/2025/1501

Hasbi, & Wibowo, M. G. (2022). Determinants of Islamic Human Development Index in OIC Countries With Good Governance as Moderating Variables. 10(1), 173–198.

Herrero, C., Martínez, R., & Villar, A. (2012). Journal of Human Development and Capabilities : A Multi-Disciplinary A Newer Human Development Index A Newer Human Development Index. Journal of Human Development and Capabilities, 13(2), 247–268.

Hicks, D. A. (1997). The Inequality-Adjusted Human Development Index: A Constructive Proposal. World Development, 25(8), 1283–1298. https://doi.org/10.1016/S0305-750X(97)00034-X

Huda, M., Haryadi, I., Susilo, A., Fajaruddin, A., & Indra, F. (2020). Conceptualizing Waqf Insan on i-HDI (Islamic Human Development Index) Through Management Maqashid Syariah. January. https://doi.org/10.4108/eai.13-2-2019.2286206

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Jurayevich, M. B., & Bulturbayevich, M. B. (2020). The impact of the digital economy on economic growth. International Journal On Intregated Education, Vol. 3 No. https://doi.org/DOI: https://doi.org/10.17605/ijie.v3i6.394

Kadir, S., Abubakar, A., Haddade, H., Ihsan, A., & Nur, A. (2022). Political stability, macro economics, and islamic human development index (i-hdi) in oic countries stabilitas politik, ekonomi makro, dan indeks pembangunan manusia islam (i-hdi) di negara oki. 8, 245–253.

Kartika, M., Kurniasih, E. P., Dosinta, N. F., & Wahid, W. (2024). Pengaruh Desentralisasi Fiskal, Pengangguran, Kemiskinan Terhadap Indeks Pembangunan Manusia (IPM) Kalimantan Barat : Perspektif Ekonomi Islam. WACANA EKONOMI (Jurnal Ekonomi, Bisnis Dan Akuntansi), 23(1), 59–71. https://doi.org/10.22225/we.23.1.2024.59-71

Klugman, J., Rodríguez, F., & Choi, H. J. (2011). The HDI 2010: New controversies, old critiques. Journal of Economic Inequality, 9(2), 249–288. https://doi.org/10.1007/s10888-011-9178-z

Lubis, R. (2020). Analysis Relationship of Economic Growth, Fiscal Policies and Demographic to Islamic Human Development Index in Indonesia (Granger Causality Approach). FITRAH: Jurnal Kajian Ilmu-Ilmu Keislaman, 6(1), 31–46. https://doi.org/10.24952/fitrah.v6i1.2490

Mamuka, V., & Elim, I. (2014). Analisis Dana Transfer Pada Pemerintah Daerah Kabupaten Kepulauan Talaud. Jurnal Riset Ekonomi, Manajemen, Bisnis Dan Akuntansi, 27(2), 58–66. http://117.74.115.107/index.php/jemasi/article/view/537

Mariano, E. B., Ferraz, D., & de Oliveira Gobbo, S. C. (2021). The Human Development Index with Multiple Data Envelopment Analysis Approaches: A Comparative Evaluation Using Social Network Analysis. In Social Indicators Research (Vol. 157, Issue 2). Springer Netherlands. https://doi.org/10.1007/s11205-021-02660-4

McGillivray, M. (1991). The human development index: Yet another redundant composite development indicator? World Development, 19(10), 1461–1468. https://doi.org/10.1016/0305-750X(91)90088-Y

Morse, S. (2014). Stirring the pot. Influence of changes in methodology of the Human Development Index on reporting by the press. Ecological Indicators, 45, 245–254. https://doi.org/10.1016/j.ecolind.2014.04.023

Mutiha, A. H. (2018). The Effect of Regional Own-source Revenue, Tax Revenue-sharing Fund, General Allocation Fund and Special Allocation Fund to the Human Development Index (Based on the Study of Provincial Government in Indonesia). KnE Social Sciences, 3(11), 609. https://doi.org/10.18502/kss.v3i11.2792

Natoli, R., Feeny, S., Li, J., & Zuhair, S. (2024). Aggregating the Human Development Index: A Non-compensatory Approach. Social Indicators Research, 172(2), 499–515. https://doi.org/10.1007/s11205-024-03318-7

Nugroho, M. E., & Hendrati, I. M. (2024). Pengaruh Pendapatan Asli Daerah dan Dana Perimbangan Terhadap Indeks Pembangunan Manusia Kabupaten/Kota NTB Tahun 2018-2022. Indo-Fintech Intellectuals: Journal of Economics and Business, 4(2), 355–366. https://doi.org/10.54373/ifijeb.v4i2.1281

Oates, W. E. (1974). Fiscal Federalism. American Political Science Review, 68(4), 1777–1778. https://doi.org/10.2307/1959998

Putra, S. M., Manan, A., & Yuniarti, T. (2023). Socio-Economic and Humanistic Aspects for Analysis of the Influence of Regional Original Revenue Balancing Fund and Gross Regional Domestic Product on the Human Development Index in West Nusa Tenggara Province in 2008-2022 Analisis Pengaruh Pendapatan Asl. Socio-Economic and Humanistic Aspects for Township and Industry, Socio-Econ, 332–339.

Putri, R. M. (2019). Determinan Islamic Human Development Index (Ihdi) Provinsi Jawa Timur Tahun 2001-2016. Jurnal Ekonomi Syariah Teori Dan Terapan, 6(7), 1410–1420.

Rahim, Z. A., Sofyan, S., & Esya, L. (2022). Human Development Index Analysis With Islamic Human Development Index (Ihdi) Approach In Dki Jakarta In 2010-2019. 2(1), 133–146.

Rangkuty, D. M., Yusuf, M., & Pasaribu, R. A. (2024). Pengaruh Pendapatan Asli Daerah, Dana Perimbangan, Belanja Daerah Terhadap Indeks Pembangunan Manusia di Provinsi Sumatera Utara. JALAKOTEK: Journal of Accounting Law Communication and Technology, 1(2), 797–806. https://doi.org/10.57235/jalakotek.v1i2.2640

Undang- Undang Republik Indonesia No. 33 Tahun 2004 Tentang Perimbangan Keuangan Antara Pemerintah Pusat Dan Pemerintahan Daerah, Pub. L. No. 33, 2004 Undang-undang Nomor 33 tahun 2004 1 (2004). http://biblioteca.usac.edu.gt/tesis/08/08_2469_C.pdf

Undang-Undang No. 32 Tahun 2004 Tentang Pemerintah Daerah, Pub. L. No. 32, Dpr 1 (2004). http://www.dpr.go.id/dokjdih/document/uu/33.pdf

Reza, M., Juliansyah, H., & Dharma, Y. (2020). the Effect of Islamic Human Development Index on Poverty Level in Bireuen District Period 2000-2017. Journal of Malikussaleh Public Economics, 1(2), 35. https://doi.org/10.29103/jmpe.v1i2.1128

Ricardo, D. (2001). The Principles of Political Economy and Taxation. In The Economics of Population: Key Classic Writings (Edisi Ke 3). J M Dent. https://doi.org/10.4324/9781351291521-9

Rizkiyah, J., & Anitasari, H. (2023). Pengaruh Dana Perimbangan Terhadap Indeks Pembangunan Manusia Kabupaten Bojonegoro. Jurnal Ekonomi Manajemen Dan Sosial, 6(1), 1–6. https://ojs.ejournalunigoro.com/index.php/JEMeS

Rochmah, S., & Sukmana, R. (2020). Pengaruh Faktor-Faktor Makroekonomi Terhadap Islamic Human Development Index (Ihdi) Di Indonesia Tahun 2013-2017. Jurnal Ekonomi Syariah Teori Dan Terapan, 6(4). https://doi.org/10.20473/vol6iss20194pp819-829

Romer, P. M. (1990). Endogenous Technological Change. The Journal of Political Economy, 98(5), 71–102. https://web.stanford.edu/~klenow/Romer_1990.pdf

Rukiah, & Siregar, S. (2019). Interactions And Contributions Between Islamic Human Development Index , Economic Growth , Fiscal Policy And Demographics In Indonesian Provinces : Panel Vector Autoregression ( P-Var ) Analisys. 1, 347–367.

Rukmana, S. H., & Imaningsih, N. (2023). Pengaruh Tingkat Pengangguran, Pendapatan Asli Daerah, dan Rata Rata Lama Sekolah terhadap Tingkat Kemiskinan Tahun 2002-2021. Kaganga:Jurnal Pendidikan Sejarah Dan Riset Sosial Humaniora, 6(2), 826–833. https://doi.org/10.31539/kaganga.v6i2.7342

Sagar, A. D., & Najam, A. (1998). The human development index: A critical review. Ecological Economics, 25(3), 249–264. https://doi.org/10.1016/S0921-8009(97)00168-7

Saputra, B., & Mahmudi. (2012). Pengaruh Desentralisasi Fiskal Terhadap Pertumbuhan Ekonomi Dan Kesejahteraan Masyarakat DI Provinsi Papua Tahun 1997-2013. Jurnal Akuntansi Dan Auditing Indonesia, 16(1993), 185–199. http://eprints.upnyk.ac.id/871/

Sembiring, R. W., Nurlinda, & Suryanto. (2024). The Influence of Balancing Funds and Original Regional Income on the Human Development Index and Poverty Levels in North Sumatra Province. International Journal of Research in Vocational Studies (IJRVOCAS), 3(4), 204–215. https://doi.org/10.53893/ijrvocas.v3i4.253

Sen, A. (1999). Development As Freedom. Oxford: Oxford University Press, 5.

Sengayi-Muchengeti, M., Joko-Fru, W. Y., Miranda-Filho, A., Egue, M., Akele-Akpo, M. T., N’da, G., Mathewos, A., Buziba, N., Korir, A., Manraj, S., Lorenzoni, C., Carrilho, C., Hansen, R., Finesse, A., Somdyala, N. I. M., Wabinga, H., Chingonzoh, T., Borok, M., Chokunonga, E., … Parkin, D. M. (2020). Cervical cancer survival in sub-Saharan Africa by age, stage at diagnosis and Human Development Index: A population-based registry study. International Journal of Cancer, 147(11), 3037–3048. https://doi.org/10.1002/ijc.33120

Setiawan, M. B., & Hakim, A. (2008). Indeks Pembangunan Manusia Manusia. Jurnal Economia, 9(1), 18-26, 9(1), 18–26. Uny.ac.id

Smith, A. (1776). An Inquiry Into the Nature and Causes of the Wealth of Nations. In an INQUIRY into our WEALTH OF NATIONS. Oxford University Press. https://books.google.co.id/books?id=C5dNAAAAcAAJ&printsec=frontcover&hl=id&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false

Soleh, A., & Ardilla, A. (2018). Peran Desentralisasi Fiskal Terhadap IPM dan Penyerapan Tenaga Kerja di Kota Jambi. Jurnal Ekonomi Dan Kebijakan Publik, 1(2), 18–26.

Srinivasan, T. N. (1994). Human development: a new paradigm or reinvention of the wheel? American Economic Review, 84(2), 238–243.

Syamsudin, Cahya, B. T., & Dewi, S. N. (2015). Pengaruh Kinerja Keuangan Terhadap Pertumbuhan Ekonomi, Pengangguran Dan Kemiskinan. Ekonomi Manajemen Sumber Daya, 17, No. 1, 15–27.

Todaro, M. (2011). Pembangunan Ekonomi Dunia Ketiga. Erlangga.

Troya, J. V. (2017). United Nations Development Programme (UNDP) views on managing LMEs in Latin America and the Caribbean. Environmental Development, 22(March), 214–216. https://doi.org/10.1016/j.envdev.2017.04.002

Viana Espinosa de Oliveira, H., & Moutinho, V. (2022). Do renewable, non-renewable energy, carbon emission and KOF globalization influencing economic growth? Evidence from BRICS’ countries. Energy Reports, 8, 48–53. https://doi.org/10.1016/j.egyr.2022.01.031

Wulandari, P. A., & Iryanie, E. (2018). Pajak daerah dalam pendapatan asli daerah (Pertama). Deepublish. https://scholar.google.co.id/citations?view_op=view_citation&hl=id&user=lc0widkAAAAJ&citation_for_view=lc0widkAAAAJ:9yKSN-GCB0IC

Zhang, W., Zhao, S., Wan, X., & Yao, Y. (2021). Study on the effect of digital economy on high-quality economic development in China. PLOS ONE, 16(9), e0257365. https://doi.org/10.1371/journal.pone.0257365

Full Text: PDF

DOI: 10.21043/equilibrium.v13i1.31164