| Summary: | This research tested the modified model of Trussel and Patrick in explaining the
fiscal distress in the municipal government in Indonesia. This model used the
same variabels with a modification as used in the model of Trussel and Patrick
i.e. revenue concentration, long term debt and local government resources. Using
the sample consist of 422 municipal government from 2006 to 2009, The modified
model of Trussel and Patrick is quite proper in explaining the fiscal distress in the
municipal government in Indonesia. The result also found that a decrease in
general allocation found as a percent of total revenue, an increase of local own
revenue as a percent, an increase of revenue growth and gross domestic regional
product growth have the influences on reducing the likelihood of fiscal distress.
However, the two others variable in this model, long-term debt and total revenue
did not support our hypothesis.
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