The economic development of a region is essentially a series of activities carried out consciously and continuously to achieve a better state simultaneously and continuously. Within that framework, as well as to spur economic development and equitable development results in order to improve the welfare of the people in a fair and equitable manner.
Todaro (1997: 18) states that the public sector (government) should be recognized and trusted to assume a greater role and a more decisive effort in the management of the national economy / area. Local Government as policy makers in the next area will prefer to adopt development policies that are tailored to the characteristics of the potential of the area itself, certainly claim to be the introduction of potential areas of economic growth for regional development.
Nopirin (1999: 275) in a perfectly competitive market system as described by the power of Adam Smith's invisible hand, the allocation of resources will be ensured efficiently without government interference. But in certain matters showed that the market mechanism has the disadvantage of failing to achieve an efficient allocation where it is due to such externalities, monopoly and public goods.
Samuelson and Nordhaus (1996: 49-50) states that the ideal economy is an economy that applying market mechanisms. This means that the way the economy fully into the market authority because only the market mechanism that can allocate resources efficiently.
High economic growth is needed to accelerate changes in the structure of the local economy towards a balanced and dynamic economy characterized by strong industry and advanced, a strong agricultural base and has a balanced growth in various sectors. Economic growth is also necessary to mobilize and spur development in other areas as well as the main force of development in order to increase household incomes and tackle social and economic inequality.
Kim (1997:156) in his research on the role of the public sector in some areas in economic growth in Korea, using regression concluded that the role of local government in regional economic growth is very important and significant. Income taxes and non-tax areas has negative and significant impact on regional economic growth, while investment and government consumption have a significant positive effect of higher.
Miller and Russek (1997:222) examine and test on the fiscal structure of local and national economic growth concludes that the local and national taxes greatly affect economic growth if the revenue is used to fund public services.
Regional economic development is a process where the local government and community groups to manage existing resources and establish a partnership between local government and the private sector to create something new employment field and promote the development of economic activities in the region. Regional development is essentially an integral part of national development, then in the implementation of regional development policy will not detached from national development.
Efforts to spur economic growth in the region has been implemented in the form of subsidies and tax relief and incentives for backward areas. As policies and efforts made by the central government in both economic development activities that have been achieved and efforts are still in progress, the role of the government in the economy Badung is giving stimulants and further encourage community economic growth.
According to some theories of growth can be said that economic growth can be measured by the increase in national income that is reflected in the value of GDP or GDP when in the area from year to year. To obtain the rate of real economic growth (real) then the increase in GDP / GDP is measured GDP / GDP based on constant prices.
Understanding the economic growth has been formulated by many different viewpoints by economists. Boediono (1999:1) argues that economic growth is the increase in output per capita in the long run. The emphasis here is on the process because it contains elements of change and indicators of economic growth seen in quite a long period of time.
Growth theories are generally divided into two groups approach the classical approach pioneered by Adam Smith, David Ricardo and Arthur Lewis, and modern embraced by Keynes (Harrod-Domar), Neo Classical (Solow-Swan). According to Adam Smith's theory of growth in Boediono (1999:7), process of economic growth in the long run involves two main aspects: the growth of total output in the form of natural resources, human resource and capital stocks.
Revenue consists of the remaining balance in the year ago, revenue, tax revenue and non-tax revenues, donations and assistance and loans. The largest revenue collected through tax revenues will reduce the purchasing power resulting in lower economic growth.
Government investment in this area is expressed in development spending can affect economic growth. Funds are used to empower a variety of economic resources to promote equity and income per capita. Fund development is also one of the inputs to produce outputs.
Government consumption expenditure is measured by expenditures. Routine expenditure has a role and a function quite large in supporting the achievement of development goals even if these expenses are not directly related to the formation of capital for the purpose of increasing production, but rather support the government and increase the range and quality of services.
Labor Force and Economic Growth
Human resources is one factor in the dynamics of long-term economic development along with science, technology resources and production capacity. Population growth and labor is considered as a positive factor in stimulating economic growth.
Large amount of labor can increase the number of productive means. With the increase in labor productivity is expected to increase production, which will increase the GDP anyway.
The role of the private sector in regional economic activity is to invest principally either area or regional level, so as to spur economic growth. The development of private investment depends on the facilities and services provided by government, of infrastructure that stimulate in order to attract foreign and domestic investors.
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