Not until 2001 the government of Indonesia introduced local autonomy to the level of regional governance.
This national policy aims to increase the alignment and relevance of government programmes with
regional needs and encourage significant participation of community on regional development. Local
autonomy is considered as an enabler for regional government to improve regional welfare, which at the
end believes to be factor that improves national welfare. Local autonomy has been interpreted as
encouraging local governance to allocate more significant percentage of budget for capital expenditures,
which is believed to be the key to boost economic growth and employment. These two factors have been
acknowledged as the variables that influence welfare. This explanatory research aims to evaluate the
implementation of local autonomy and indicate whether the implementation served its purpose as indicated
by previous studies. It applied structural path analysis to evaluate relations between aforementioned
variables. The sample for this study was taken from 38 regencies and cities in East Java over the period
from 2006 until 2011. The result shows that although local autonomy has significant and positive influence
on capital expenditure, but at the end it fails to positively influence economic growth. Furthermore, it also
shows that the increase of employment does not positively influence the public welfare.
MASTA BORU MANURUNG, SOEDJONO ABIPRAJA, SITI UMAJAH MASJKURI. (2015) Local Autonomy in Indonesia, Fall Short: Case Study East Java Province, , Volume 4, Issue 1.
