THE EFFECT OF POVERTY, UNEMPLOYMENT, AND THE DEVELOPMENT OF ECONOMIC SECTORS ON LOCAL OWN-SOURCE REVENUE IN THE REGIONS OF CENTRAL JAVA PROVINCE

Abstract

Local Own-Source Revenue (PAD) acts as the main benchmark to measure regional financial independence. This study aims to analyze the influence of poverty, unemployment, and economic sector development across regencies and cities in Central Java Province. This study uses secondary data from 35 regencies and cities in Central Java Province from 2011 to 2024. The method used is multiple linear regression with panel data. The findings reveal that poverty exerts a significant negative impact on PAD, whereas unemployment shows no significant influence. Similarly, the primary sector’s contribution doesn’t have a meaningful effect on PAD, while both the secondary and tertiary sectors demonstrate a significant positive impact. These results suggest that the fiscal capacity of regional governments in Central Java is shaped more substantially by advancements in the secondary and tertiary sectors than by the primary sector. Accordingly, local governments are encouraged to prioritize the growth of industry, trade, and services while sustaining effort to alleviate poverty in order to enhance overall regional fiscal capacity.