Abstrak
Indonesia has been experiencing a rapid economic growth amid global crises in the United. States and the European Union countries. In addition, government expenditures in Indonesia
have also shown an increasing trend in recent years. Using panel data from 33 provinces in
Indonesia from 2007 to 2012, this paper describes the current condition of GDP growth and
government expenditures, examines the relationship between government expenditure and
economic growth, and formulates government expenditure policy in order to harmonize GDP
growth, poverty alleviation, and income inequality. The result indicates that government
expenditure for development, such as building roads, hospital, bridges, electricity, and water
supply, has a significant and positive effect on the regional economic growth rate. Not only
can government expenditures affect economic growth but it also can reduce poverty by
strengthening human capital through better education and health facilities.
