on the results of the Hausman test, the best model is the method Fixed Effect Model.
3. Analysis of Panel Data Model
The chosen model is using the best analysis test, further it will describe in Variables Estimation Results from the Models in the table below:
Table 5.5
Estimation Results of Independent Variables towards Local Revenue in DistrictsCities in Riau Province
Dependent Variable:
Local Revenue Models
Fixed Effect Random Effect
Common Effect
Constant -9.341005
9.169051 10.52990
Std. Error 4.191211
1.120828 0.970080
T-Statistic -2.228713
8.180605 10.85467
Probability 0.0309
0.0000 0.0000
Total Population -0.601143
-0.310091 -0.237861
Std. Error 0.384706
0.108310 0.094218
T-Statistic -1.562605
-2.863010 -2.524568
Probability 0.1252
0.0059 0.0144
Gov. Spending 1.824001
0.509185 0.717566
Std. Error 0.315956
0.101537 0.100600
T-Statistic 5.772952
5.014762 7.131849
Probability 0.0000
0.0000 0.0000
GRDP 0.387503
0.405490 0.083274
Std. Error 0.053798
0.039985 0.059433
T-Statistic 7.202888
10.14108 1.401141
Probability 0.0000
0.0000 0.1667
R
2
0.965932 0.707995
0.756498
F-Statistic 91.13615
45.25916 57.99240
Prob F-Stat 0.000000
0.000000 0.000000
Durbin-Watson Stat
1.582948 0.669860
0.554047 Source: All Results Processed with Eviews8.0
From the results of tests performed on both the analysis, with Chow Test or Likelihood Test and Hausman Test, the best model used is Fixed Effect
Model. The selection of using Fixed Effect Model is based on the significance
of the variables instead of using two other models Random Effect Model and Common Effect Model.
C. Estimation Results of Regression Panel Model
After selecting model that used in the test statistic and the election of Fixed Effect Model as the model used in this study panel data model
approach that combines cross-section and time series. In this model, the dimensions of time and individuals data in the districtscities, assumed to be
the same in every period. So here is the estimation of data with the number of
observations by 12 districtscities in Riau Province in 2010-2014. Table 5.6
Fixed Effect Model
Variables Coefficient
Std.Error t-Statistic
Prob. C
-9.341005 4.191211
-2.228713 0.0309
Total Pop.
-0.601143 0.384706
-1.562605 0.1252
Gov. Spending
1.824001 0.315956
5.772952 0.0000
GRDP
0.387503 0.053798
7.202888 0.0000
R
2
0.965932
ProbF-statistic
0.000000
F-statistic 91.13615
Durbin-Watson Stat 1.582948
Source: Processed with Eviews8.0 With this result estimation of Fixed Effect Model, we conclude the factors
that affect to Local Revenue PAD for districtscities in Riau Province in 2010-2014 are with following equation:
Where: Y= Dependent Variable LDR
α = Constants X1= 1
st
Independent Variable X2= 2
nd
Independent Variable X3= 3
rd
Independent Variable b{1…2} = Regression Coefficient of each Independent Variable
e = Error term t = Time
i = Companies
With the following results: Local Revenue PAD = -9.341005 + -0.601143Total_Population +
1.824001Government_Spending +
0.387503GDRP Where:
Y = Local Revenue PAD
X1 = Total Population
X2 = Government Spending
X3 = Gross Regional Domestic Product GRDP
α = -9.341005 it means, when all independent variables Total
Population, Government Spending and GDRP are constant or does not change, then the Local Revenue is -9.341005.
b
1
= -0.601143 it means, when Total Population increased by one people, then Local Revenue is decreased by -0.601143 and assuming that
Local Revenue is constant.
b
2
= 1.824001 it means, when Government Spending increased by one rupiah, then Local Revenue is increased by 1.824001 and assuming that
Local Revenue is constant. b
3
= 0.387503 it means, when GRDP increased by one rupiah, then Local Revenue is increased by 0.387503 and assuming that Local Revenue is
constant. From the panel data regression estimation results above, we can conclude
from the Local Revenue constant value in Districts Cities in Riau Province as follows: Kuantan Sengingi on 0.604451779504, Indragiri Hulu on
0.322957952942, Indragiri Hilir on 0.138062513102, Pelalawan on 0.152954715738, Siak on -1.12098218659, Kampar on -0,259775053347,
Rokan Hulu on 0.934018154979, Rokan Hilir on -0.0762003395201, Bengkalis on -1.30803662689, Kep. Meranti on 1.48199349951, Pekanbaru
on -0.837764840677, Dumai on -0.0316795687438. From the details of each districtscities in Riau province, it can be seen that
Meranti Island has a largest Local Revenue among all districtscities in Riau Province. The revenue of Meranti Island comes from the increasing amount of
taxes and levies. It happened because of Meranti people are orderly in paying taxes and levies. Otherwise, many natural resources that have the potential for
economic growth contained in Meranti Islands, both in the processing sector of oil and gas, plantation, fisheries, trade and tourism. And the smallest Local
Revenue is Bengkalis. With assumption, that Local Government can manage correctly the allocation of Funds that comes from every sector in Bengkalis.
D. Statistic Test
1. T-Statistic Test
The t-test was conducted to see the significance of individual independent variables on the dependent variable to consider other independent variables
are constant. The Hypothesis is formulated as: H
= it means, the independent variable has no significant affect to the dependent variable.
H
1
= it means, the independent variable has significant affect to the dependent variable.
Table 5.7
Statistic Test
Variables Coefficient
t-Statistic C
Total Population
-9.341005 -0.601143
-2.228713 -1.562605
Government Spending
1.824001 5.772952
GRDP 0.387503
7.202888 Source: Processed with Eviews8.0
Note: denotes significant at α = 1, denotes significant at α = 5, = denotes significant at α = 10.
To determine whether independent variables Total Population, Government Spending and GRDP, has an influence on Local Revenue it is
necessary to test hypotheses as follows: a.
To determine whether Total Population have an influence or not towards Local Revenue, it is necessary to test hypotheses as follows:
