The Impact of Intergovernmental Transfers on Infrastructure Capital Expenditure: The Mediating Role of Fixed Asset Value

Weldan Prahasandika Yuda; Iskandar Muda; Nazaruddin Nazaruddin

doi:10.55927/jfbd.v4i4.541

Authors

Weldan Prahasandika Yuda Universitas Sumatera Utara
Iskandar Muda Universitas Sumatera Utara
Nazaruddin Nazaruddin Universitas Sumatera Utara

DOI:

https://doi.org/10.55927/jfbd.v4i4.541

Keywords:

Intergovernmental Transfers, Infrastructure Capital Expenditure, Fixed Asset Value, Path Analysis, Fiscal Decentralization

Abstract

This study examines the complex relationship between intergovernmental transfers and infrastructure capital expenditure, incorporating fixed asset value as a mediating variable. Diverging from traditional approaches that posit a direct relationship between fiscal transfers and capital spending, we employ path analysis to uncover indirect mechanisms operating through asset accumulation and valuation. Drawing on empirical evidence from 23 districts/municipalities in Aceh Province, Indonesia over the period 2008-2021, our findings reveal that while intergovernmental transfers exert a positive and significant direct effect on infrastructure capital expenditure (β = 0.412, p < 0.001), the mediating role of fixed asset value proves negative and statistically insignificant (indirect effect = -0.023, p = 0.284). These results indicate that infrastructure spending allocation decisions are predominantly driven by the direct availability of transfer funds (explaining 63.64% of variance) rather than by consideration of accumulated asset values.

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