The effect of productive spending on regional economic growth

  • Transna Putra Urip  
    Universitas Cendrawasih
    Indonesia
  • Boy Piter Nizu Kekri
    Universitas Cendrawasih
    Indonesia
  • Ade Hilman Maulana
    Universitas Islam Negeri Siber Syekh Nurjati Cirebon
    Indonesia

Abstract

Regional expenditure is often considered productive merely because it is recorded as capital spending, although its growth effect depends on targeting, execution timing, asset quality, program complementarity, and local institutional capacity. This study examines how productive expenditure influences regional economic growth in Indonesia using a qualitative library research design and document analysis. The corpus covers scholarly articles, international institutional reports, regulations, Statistics Indonesia growth data, and the national regional-budget posture reported in the Ministry of Finance’s Regional Financial Information System. Evidence was processed through data reduction, thematic coding, cross-source comparison, and explanatory synthesis. Productive expenditure operates through five channels: expanding infrastructure stock, strengthening human capital, reducing transaction costs, improving the productivity of leading sectors, and generating demand multipliers. These effects are conditional and time-lagged. The budgeted capital-spending share ranged from 15.83 to 18.20 percent of total regional expenditure in 2020–2024, while execution levels and timing fluctuated. Economic growth recovered from a 2.07 percent contraction in 2020 to 5.03 percent in 2024, but this aggregate pattern cannot be interpreted as direct causal evidence. The study’s novelty is the Productive Expenditure Transmission Matrix, which integrates allocation, execution, output quality, complementarity, and lagged outcomes. The findings imply that local governments should move from a spending-volume orientation toward portfolio quality and asset functionality.

Keywords
  • Productive expenditure,
  • Capital spending,
  • Regional economic growth,
  • Spending quality,
  • Fiscal decentralization
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