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The Causal Relationship between Local Financial Performance and Border Communities Welfare in Indonesia Eastern Areas

The regional development in border areas including in eastern Indonesia can not be separated from important participation of local government as reflecting through the local financial performance indicators. Mostly, in some recent decades, there has been a defined policy on fiscal decentralization which is able to boost the local governments to escalate their financial performances. This research aims to seek the magnitude of local financial performance effects on the border community welfare in the areas. Furthermore, this research is also intended to discover the border community welfare effects on local financial performance. The research uses secondary data that is the application of the panel data analysis method. The results show that local financial performance is not affected by the increasing welfare of the border community. However, the upliftment of community welfare indeed possesses a significant influence on an increase in local financial performance. Efforts are needed to improve the welfare of border communities through increasing development priorities, especially by the central government to the foremost and outermost areas in eastern Indonesia.