One of the main challenges faced by local governments in developing countries is to allocate\nscarce resources effectively to achieve the community�s highest priorities. This challenge\nrelates to government�s effort to reduce regional inequality. This paper examined the\nrelationship between priority-based budgeting policy and local growth imbalance by using\neconomic structure transformation as the intervening variable. The researchers employed\nmultivariate regression and path-analysis to examine the relationship. The results revealed\nthat the priority-based budgeting affected local inequality significantly through structural\ntransformation. It explicitly demonstrates that the prioritized government allocation in\neducation, health, and education plays an important role to strengthen economic\ntransformation leading to reduce regional divergence.
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