Effect of Fiscal Desentralization and Region-wide Corruption Level in Indonesia

Many parties suspect that there is an in-between relationship of fiscal decentralization and the corruption level in the regencies and city. This study aims to examine the effect of fiscal decentralization on the city-wide corruption level in Indonesia. This study used the General Allocation Fund (Dana Alokasi Umum or DAU) of the regency and city, age of regency and city, and location of regency and city as the control variables. The population of this research is all regencies and cities in Indonesia. As the data sources, we used the secondary data. The research sample was selected using the purposive sampling method. Hypothesis testing uses multiple regression analysis, the coefficient of determination test (R 2 ), and partial test (t-test). The statistical test results of the significance level of fiscal decentralization of the corruption level is 0.016 smaller than the significance level of 0.05 (5%). This result shows that fiscal decentralization has a significant effect on the corruption level of regencies and city in Indonesia. The statistical significance level results for the control variable are regency and city’s DAU of 0.081, age of regency and city of 0.221, and regency and city location of 1.222. This means that the DAU, age, and location of regencies and cities have no significant effect on the corruption level of regencies and cities in Indonesia. Keywords—Fiscal Decentralization, Corruption Level, Regency and City.