Determinants of Local Government Revenue: A Survey of Regional Economic Development in Indonesia

This study aims to determine the variables as determinants of local government revenue in Indonesia. The research method used was panel data regression analysis for 34 provinces in Indonesia from 2016-2021 with variables of local government revenue (LGR), gross regional domestic product (GRDP), road length (RL), domestic investment (INV), population (POP), human development index (HDI), and foreign direct investment (FDI). Based on the Chow test, the Hausman test and the LM test results, it was found that the suitable model was the fixed effect model (FEM). The results showed that all variables significantly affected LGR values, except for the foreign direct investment (FDI) and road length (RL). The variables with a considerable influence on the local government revenue (LGR) increase were the population (POP), domestic investment (INV), human development index (HDI), and gross regional domestic product (GRDP). The recommendation in this research is that it is necessary to formulate an integrated policy between the local government and actors from each district or city to encourage rapid economic development independence by improving the investment and business climate.