Impacts of Financial Performance of Local Governments on Human Development Index in Papua

Abstract

This study aims to analyse the impacts of financial performance of local governments on Human Development Index (HDI) in regencies and cities in West Papua Province and Papua Province. These provinces are chosen because they are in the lowest level of HDI rank in Indonesia. In order to measure financial performance of local governments, this research uses 4 ratios: Fiscal Decentralisation Ratio, Regional Dependency Ratio, Effectiveness Ratio of Locally-generated Revenue (PAD), and Capital Expenditure Ratio. Results of this study are that Fiscal Decentralisation Ratio has significant positive impact on HDI while Regional Dependency Ratio and Capital Expenditure Ratio have significant negative effect on HDI in both provinces. Other variable, Effectiveness Ratio of Locally-generated Revenue (PAD), has negatif impact on HDI; however, it is not significant.