ANALISIS DAMPAK PERDAGANGAN BEBAS TERHADAP KETIMPANGAN PEMBANGUNAN WILAYAH (Studi Kasus: Provinsi Jawa Tengah)

Abstract

Economic development is the main instrument for achieving national goals. There are many efforts towards the success of development, including trade liberalization and fiscal decentralization. Liberalization of trade (8 October 2003, AFTA). Fiscal Decentralization (1 January 2001), as the demands of change centralization under the Law. 32/2004 on Regional Governance and Law. 33/2004 on Financial Balance and Regional Center (revision of Law No. 22/1999 and Law No. 25/1999). Economic growth of Central Java province from years has increased. However, uneven economic growth between the County/ City. This study aims to analyze impact of free trade, foreign direct investment, economic growth, fiscal decentralization, tax region, the economic crisis on inequality of development. The analytical tool used is the Engle-Granger's Error Correction Models (EG-ECM). Econometric analysis shows free trade, economic growth, fiscal decentralization has positive influence on the development gap in the short and long term. Meanwhile, local taxes have a negative effect on inequality of development in the short and long term. Then, there are differences in inequality of development before and after the 1997 economic crisis in Indonesia. As a follow up to solve the problem of inequality of development, the provincial government needs to determine the appropriate strategy and policy.