Influence of PAD and DAU on Economic Growth with Capital Expenditure as an Intervening Variable on Regency and Municipal Government in South Kalimantan Province

The purpose of this study is to examine and analyze how PAD (Local Original Revenue) and DAU (General Allocation Fund) affect direct and indirect economic growth. This paper differs from previous research, which generally places economic growth as an exogenous factor, and the results remain inconsistent. While this research puts the variable of economic growth in an endogenous position that is factor influenced by public expenditure, which in this context is the allocation of capital expenditure. PAD is an indicator of local government productivity that is influenced by local government innovations in the development of productive assets. DAU is one aspect of funding derived from government transfers used for public spending. The results of this study indicate that PAD has no significant effect on capital expenditure allocation. PAD is also an indicator of regional independence in providing financing sources of regional development. Theoretically, the greater the PAD of an area, the more independent the region is. But for whatever achievement PAD, if there is inefficiency in the management, the amount of PAD will be absorbed for operational financing, so it does not affect the capital expenditure for investment purposes. DAU has a significant influence on capital expenditure and economic growth. The total effect of DAU on Economic Growth through the Capital Expenditure is 0.359 or 36 percent. While the indirect effect of DAU (0.082 or 8 percent) is lower than the direct impact on economic growth (28 percent). This proves that capital expenditure variables have a role as a mediating variable, in the form of partial mediation.