Intergovernmental transfers in indonesia: The risk sharing effect of dana alokasi umum

Research output: Contribution to journalArticlepeer-review


Given that most local governments in Indonesia depend heavily on intergovernmental transfers, this study tries to examine whether Dana Alokasi Umum (DAU, or general allocation fund) is able to absorb a revenue shock from the fluctuation of Pendapatan Asli Daerah (PAD, or local government revenue). The results suggest that DAU does, in fact, absorb around 83 per cent of the revenue shock. This share is greater than the compensation rate determined by the allocation formula employed in the Indonesian intergovernmental transfers system set annually by the Directorate General of Fiscal Balance, Ministry of Finance. Once the differences among local government levels are considered, it is found that DAU covers PAD decrease across all levels of local government throughout the country, but the extent of coverage depends on a number of criteria.

Original languageEnglish
Pages (from-to)81-99
Number of pages19
JournalJournal of Southeast Asian Economies
Issue number1
Publication statusPublished - Apr 2021


  • Dana Alokasi Umum
  • General Allocation Fund
  • Indonesia
  • Intergovernmental transfers
  • Pendapatan Asli Daerah


Dive into the research topics of 'Intergovernmental transfers in indonesia: The risk sharing effect of dana alokasi umum'. Together they form a unique fingerprint.

Cite this