FISCAL POLICY AND HUMAN DEVELOPMENT: EMPIRICAL EVIDENCE FROM THE NEWLY ESTABLISHED AUTONOMOUS REGIONS IN PAPUA, 2018-2024

Abstract

The newly established Autonomous Regions (DOB) in Papua, specifically South Papua, Central Papua, and Highland Papua, continue to record the lowest Human Development Index (HDI) scores in Indonesia despite receiving significant fiscal transfers. This study aims to analyze the influence of education and health sector expenditures on HDI outcomes within these regions from 2018 to 2024. Utilizing panel data regression with a Fixed Effect Model (FEM) covering 20 regencies, the research investigates how targeted fiscal allocations translate into human development improvements in structurally complex and geographically isolated territories. The empirical results demonstrate that Education Expenditure exerts a positive and highly significant impact on the HDI, identifying it as the primary driver for elevating knowledge dimensions such as mean years of schooling. Conversely, Health Expenditure shows no statistically significant effect on HDI within the observed timeframe. This indicates that while educational investments effectively foster human capital, health spending in the Papua DOB regions is currently obstructed by severe structural barriers, including hyper-inflationary logistical costs, critical shortages of medical personnel, and persistent security instability. These findings imply that regional governments must prioritize mandatory educational spending through outcome-based programs, such as scholarship schemes and boarding school initiatives, to sustain long-term human development. Furthermore, for health expenditures to be effective, policymakers must transition from purely administrative budget increases toward addressing the underlying physical and geopolitical constraints that currently hinder service delivery. This study provides critical policy insights for regional authorities and the central government to enhance the quality of fiscal management and ensure that public spending generates tangible improvements in the welfare of the Papuan community.