The Effect of Fiscal Balance Funds on Income Inequality and Economic Growth of Districts/Municipalities in West Nusa Tenggara During 2018-2023

Regional income disparity and uneven economic growth remain persistent development challenges in West Nusa Tenggara Province, despite the continued implementation of fiscal decentralization and the increasing allocation of intergovernmental fiscal transfers. This condition raises questions regarding the effectiveness of fiscal transfer instruments in simultaneously promoting economic growth and reducing income inequality across districts and municipalities. Accordingly, this study aims to examine the effects of Revenue Sharing Funds (DBH), General Allocation Funds (DAU), Physical Special Allocation Funds (Physical DAK), Non-Physical Special Allocation Funds for Health Operations (DBOK), and Non-Physical Special Allocation Funds for Education Operations (DBOP) on income inequality and economic growth in districts/municipalities of West Nusa Tenggara during the period 2018-2023. This study employs a quantitative approach using panel data regression analysis. Income inequality is measured by the Gini Ratio, while economic growth is proxied by real GDP per capita. The results indicate that DBH, Physical DAK, and DBOK have a significant role in reducing income inequality, whereas DAU and DBOP do not show a significant effect. In contrast, regional economic growth is significantly influenced by DBH, DAU, and DBOP, with DBOP emerging as the most dominant factor, while Physical DAK and DBOK do not exhibit a direct impact. These findings suggest that intergovernmental fiscal transfers in West Nusa Tenggara have not yet functioned optimally in achieving both growth and equity objectives simultaneously, highlighting the need for more targeted and outcome-oriented fiscal management at the regional level.