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Abstract

Purpose: By examining the impact of general allocation funds (DAU), special allocation funds (DAK), revenue-sharing funds (DBH), and Locally-generated revenue (PAD) on regional expenditure from 2021 to 2025, this study aims to re-examine the phenomenon of the flypaper effect on Indonesian local governments.


Research Method: Panel data regression analysis is the tool of choice for this quantitative investigation. This study's population comprises Indonesian provinces, and the sample comprises 165 panel observation points, collected through purposive sampling over a 5-year observation period. The EViews 14 program is used to process the data.


Results and Discussion: Both the general allocation fund (DAU) and the revenue-sharing fund (DBH) positively affect regional expenditure. However, the effects are not statistically significant, according to the study's findings. However, locally generated revenue (PAD) and the Special Allocation Fund (DAK) have a significant positive effect on regional expenditure. These results demonstrate that reliance on federal transfer money has less impact on regional expenditure than the capacity of local governments to generate locally generated revenue. There is substantial evidence that DAK affects regional spending, although this impact is much lower than PAD's. This proves that the flypaper impact on regional expenditure is nonexistent.


Implications: According to these results, local governments must continue working toward greater financial independence by making the most of PAD sources such as regional taxes, levies, and asset management. Meanwhile, it is the central government's responsibility to ensure that regional development is still supported through funding transfers.


Originality: The results of this research disprove the hypothesis that regional expenditure by Indonesian provinces is subject to the flypaper effect.

Keywords

Flypaper Effect Regional Expenditure Transfer Funds Regional Revenue

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Danil, M., Furqan, A. C., Syafitri, R., & Luneto, A. R. (2026). Are Government Transfers Sticky? Tracing The Flypaper Effect Across Indonesian Provinces. Advances in Taxation Research, 4(3), 203–217. https://doi.org/10.60079/atr.v4i3.1073
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