Volume 12 Issue 6
Dec.  2021
Turn off MathJax
Article Contents
Astrid Wiyanti, Alin Halimatussadiah. Are Disasters a Risk to Regional Fiscal Balance? Evidence from Indonesia[J]. International Journal of Disaster Risk Science, 2021, 12(6): 839-853. doi: 10.1007/s13753-021-00374-2
Citation: Astrid Wiyanti, Alin Halimatussadiah. Are Disasters a Risk to Regional Fiscal Balance? Evidence from Indonesia[J]. International Journal of Disaster Risk Science, 2021, 12(6): 839-853. doi: 10.1007/s13753-021-00374-2

Are Disasters a Risk to Regional Fiscal Balance? Evidence from Indonesia

doi: 10.1007/s13753-021-00374-2
  • Available Online: 2021-12-27
  • Indonesia is an archipelago country and is fairly vulnerable to disasters. While disasters generally affect government revenue and expenditure, their effects likely vary by country. This study examines the effect of disasters on the fiscal balance, revenue, and expenditure of local governments. We used panel data and fixed effects methods to estimate the degree to which disaster severity influences budgetary solvency at the district and provincial levels in Indonesia between 2010 and 2018. This study revealed that disasters can strain fiscal balance at the district and provincial levels due to a decrease in own-source revenue and an increase in social assistance expenditure, capital expenditure, consumption expenditure, and unexpected expenditure. The district expenditure most threatened by disasters is consumption expenditure, while the provincial expenditure most threatened is unexpected expenditure. We also found that an increase in capital expenditure can lead to financial burden due to delays of planned projects or post-disaster reconstruction. Based on these findings, it is clear that some forms of insurance or other financing schemes are necessary to mitigate the adverse impacts of disasters on regional fiscal balance.
  • loading
  • Alam, M., and A. Hoque. 2019. Spending pressure, revenue capacity and financial condit[i]on in municipal organizations: An empirical study. The Journal of Developing Areas 53(1): 243-256.
    Benali, N., M.B. Mbarek, and R. Feki. 2019. Natural disaster, government revenues and expenditures: Evidence from high and middle-income countries. Journal of the Knowledge Economy 10(2): 695-710.
    Benson, C., and E.J. Clay. 2004. Understanding the economic and financial impacts of natural disasters. Disaster Risk Management Series no. 4. Washington, DC: World Bank.
    Bergholt, D., and P. Lujala. 2012. Climate-related natural disasters, economic growth, and armed civil conflict. Journal of Peace Research 49(1): 147-162.
    Bevan, D., and S. Cook. 2015. Public expenditure following disasters. World Bank Policy Research Working Paper no. 7355. Accessed 9 Sept 2021. https://doi.org/10.1596/1813-9450-7355
    Bisogno, M., B. Cuadrado-Ballesteros, S. Santis, and F. Citro. 2019. Budgetary solvency of Italian local governments: An assessment. International Journal of Public Sector Management 32(2): 122-141.
    Botzen, W.J.W., O. Deschenes, and M. Sanders. 2019. The economic impacts of natural disasters: A review of models and empirical studies. Review of Environmental Economics and Policy 13(2): 167-188.
    Calkin, D.E., K.M. Gebert, J.G. Jones, and R.P. Neilson. 2005. Forest service large fire area burned and suppression expenditure trends, 1970-2002. Journal of Forestry 103(4): 179-183.
    Cermeño, R., and K.B. Grier. 2006. Conditional heteroskedasticity and cross-sectional dependence in panel data: An empirical study of inflation uncertainty in the G7 countries. In Panel data econometrics: Theoritical contributions and empirical applications, ed. B.H. Baltagi, 259-277. Amsterdam: Elsevier.
    Chapman, J.I. 2008. State and local fiscal sustainability: The challenges. Public Administration Review 68(1): 115-131.
    Chhibber, A., and R. Laajaj. 2008. Disasters, climate change and economic development in Sub-Saharan Africa: Lessons and directions. Journal of African Economies 17((Supplement 2)): ii7-ii49.
    Deryugina, T. 2017. The fiscal cost of hurricanes: Disaster aid versus social insurance. American Economic Journal: Economic Policy 9(3): 168-198.
    Escaleras, M., and C.A. Register. 2012. Fiscal decentralization and natural hazard risks. Public Choice 151(1-2): 165-183.
    Honadle, B.W., J.M. Costa, and B.A. Cigler. 2004. Fiscal health for local governments. Amsterdam: Elsevier.
    Ibarraran, M.E., M. Ruth, S. Ahmad, and M. London. 2009. Climate change and natural disasters: Macroeconomic performance and distributional impacts. Environment, Development and Sustainability 11(3): 549-569.
    Jimenez, B.S. 2009. Fiscal stress and the allocation of expenditure responsibilities between state and local governments: An exploratory study. State and Local Government Review 41(2): 81-94.
    Klomp, J., and K. Valckx. 2014. Natural disasters and economic growth: A meta-analysis. Global Environmental Change 26: 183-195.
    Lee, D., H. Zhang, and C. Nguyen. 2018. The economic impact of natural disasters in Pacific island countries: Adaptation and preparedness. IMF Working Papers Vol. 18. Washington, DC: International Monetary Fund. Accessed 6 Sept 2020. https://doi.org/10.5089/9781484353288.001
    Leppänen, S., L. Solanko, and R. Kosonen. 2017. The impact of climate change on regional government expenditures: Evidence from Russia. Environmental and Resource Economics 67(1): 67-92.
    Lis, E.M., and C. Nickel. 2010. The impact of extreme weather events on budget balances. International Tax Public Finance 17(4): 378-399.
    Medina, L. 2018. Assessing fiscal risks in Bangladesh. Asian Development Review 35(1): 196-222.
    Miao, Q., Y. Hou, and M. Abrigo. 2018. Measuring the financial shocks of natural disasters: A panel study of U.S. States. National Tax Journal 71(1): 11-44.
    Ministry of Finance. 2018. Disaster risk financing and insurance strategy. Jakarta, Indonesia: Fiscal Policy Agency.
    Mochizuki, J., S. Vitoontus, B. Wickramarachchi, S. Hochrainer-Stigler, K. Williges, R. Mechler, and R. Sovann. 2015. Operationalizing iterative risk management under limited information: Fiscal and economic risks due to natural disasters in Cambodia. International Journal of Disaster Risk Science 6(4): 321-334.
    Narayan, P.K. 2003. Macroeconomic impact of natural disasters on a small island economy: Evidence from a CGE Model. Applied Economics Letters 10(11): 721-723.
    Noy, I., and C. Edmonds. 2019. Increasing fiscal resilience to disasters in the Pacific. Natural Hazards 97(3): 1375-1393.
    Noy, I., and A. Nualsri. 2011. Fiscal storms: Public spending and revenues in the aftermath of natural disasters. Environment and Development Economics 16(1): 113-128.
    Ouattara, B., E. Strobl, J. Vermeiren, and S. Yearwood. 2018. Fiscal shortage risk and the potential role for tropical storm insurance: Evidence from the Caribbean. Environment and Development Economics 23(6): 702-720.
    Panwar, V., and S. Sen. 2019. Economic impact of natural disasters: An empirical re-examination. Margin: The Journal of Applied Economic Research 13(1): 109-139.
    Shabnam, N. 2014. Natural disasters and economic growth: A review. International Journal of Disaster Risk Science 5(2): 157-163.
    Skidmore, M., and H. Toya. 2013. Natural disaster impacts and fiscal decentralization. Land Economics 89(1): 101-117.
    Strulik, H., and T. Trimborn. 2019. Natural disasters and macroeconomic performance. Environmental and Resource Economics 72(4): 1069-1098.
    Tang, R., J. Wu, M. Ye, and W. Liu. 2019. Impact of economic development levels and disaster types on the short-term macroeconomic consequences of natural hazard-induced disasters in China. International Journal of Disaster Risk Science 10(3): 371-385.
    Unterberger, C. 2017. How flood damages to public infrastructure affect municipal budget indicators. Economics of Disasters and Climate Change 2(1): 5-20.
    Wu, J., G. Han, H. Zhou, and N. Li. 2018. Economic development and declining vulnerability to climate-related disasters in China. Environmental Research Letters 13(3): 034013.
  • 加载中


    通讯作者: 陈斌, bchen63@163.com
    • 1. 

      沈阳化工大学材料科学与工程学院 沈阳 110142

    1. 本站搜索
    2. 百度学术搜索
    3. 万方数据库搜索
    4. CNKI搜索

    Article Metrics

    Article views (72) PDF downloads(0) Cited by()
    Proportional views


    DownLoad:  Full-Size Img  PowerPoint