Accelerated Housing Development, Fiscal Decentralization and Economic Growth: Evidence from Indonesia

Abstract

This study examines the impact of housing development on provincial economic growth in Indonesia, taking into account the role of fiscal decentralisation. Panel data from 34 provinces covering the period 2015–2024 were analysed using the System Generalised Method of Moments to account for growth dynamics and potential endogeneity. Economic growth is measured by the real GRDP growth rate, housing development by the percentage of households living in adequate housing, and fiscal decentralisation by the ratio of local government revenue to total revenue. The results indicate that housing quality makes a positive contribution to regional economic performance as part of the physical capital that underpins productivity. Fiscal decentralisation also has a positive effect by providing policy flexibility for local governments. However, the interaction between the two produces a weakened effect, indicating that without effective institutional coordination, fiscal autonomy may reduce the effectiveness of housing expenditure. The synchronisation of housing policy and fiscal governance is key to sustainable regional economic growth.