The Effects of Specific Allocation Fund (DAK) on Local Economic Development: A Mixed Method Analysis on Central Java Province, Indonesia
The Effects of Specific Allocation Fund (DAK) on Local Economic Development: A Mixed Method Analysis on Central Java Province, Indonesia

Summary/Abstract: The management of the Specific Allocation Fund (DAK) requires good governance. This argument seems logic based on the claim of some studies that there are problems in planning and implementation in DAK policy. Thus, the benefit of DAK on local economic development can be debatable. This study tries to examine the relationship between DAK and local economic development in 35 districts/cities of Central Java Province over the period 2010–2014. In addition, a case study on how DAK policy is planned and implemented at the district and provincial level is investigated. The econometric results show that DAK in education and health, trade infrastructure and supporting facilities, as well as infrastructure and transportation sector give a significant contribution on a rise in growth and a decrease in the number of poor people, respectively. However, qualitative analysis indicates that the good governance practices only take place on the planning and implementation aspect of DAK in infrastructure sector, though elite capture is still a major hindrance in its allocation process.

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