The Role of Local Government in Budget Allocation And Management Towards Income Distribution Inequality And Economic Growth Of Regencies, City In Bali Province

ABSTRACT: Data of Gini ratio in all regencies/city in Bali up to 2016 indicates a number of < 0.4. The ratio is a challenge for local government through budget mechanism to reduce income inequality. The fact indicates that inequality in income distribution occurs although in low range, whereas, economic growth tends to increase. Data processed is secondary data that analyzed using SEM-PLS with WARPLS application. The research aims to analyze the influence of the role of government budget in budget allocation and management on income distribution inequality and economic growth of regencies/city in Bali using panel data of 2011-2015. Research result indicates that the role of local government budget and local budget management influence income distribution inequality, whereas the role of government budget has no influence on budget management and growth and income distribution inequality has no influence on local economic growth. Variable of income distribution inequality does not mediate the research model. Research conclusion is that paradigm of functional principle-based budget orientation should be changed to usefulness principle. The economic growth of regencies/city in Bali is mostly driven by the role of private sector in local economy; therefore, income distribution inequality has no impact on economic growth. Due to the condition, the existing space in local fiscal can be focused more on efforts in society empowerment in order to increase society income in the region. One of efforts can be conducted by local government is by activating and optimizing regional income, especially those obtained from Corporate Social Responsibility (CSR) to increase public service financing and society income. Keywords: Budget, Inequality, Growth, CSR.