Does Gross Regional Domestic Product Fully Mediate Poverty Reduction? An Inter-District Analysis in Aceh Province

Over the last two decades, Aceh Province has been one of the provinces with a high poverty level that will reduce people's welfare. This study investigates the impact of fiscal level, human capital, and Zakat on poverty in Aceh Province, considering the mediating role of Gross Regional Domestic Product (GRDP). Using panel data regression analysis and path analysis, this study examined data from 23 districts/cities in Aceh from 2010 to 2022. Four models were developed to explore the relationships between variables. The results showed that fiscal level positively affected poverty, whereas human capital and Zakat had negative effects. The fiscal level negatively influences GRDP, whereas human capital and Zakat positively impact it. GRDP demonstrated a significant negative effect on poverty. When all variables were considered together, fiscal level positively affected poverty, while human capital, Zakat, and GRDP showed negative effects. Mediation analysis revealed that GRDP partially mediated the relationship between fiscal level and poverty, with fiscal level negatively affecting GRDP but positively influencing poverty. GRDP also partially mediates the effects of fiscal level, human capital, and Zakat on poverty. These findings suggest that the Aceh Government should focus on effectively managing central government transfer funds and regional revenues to improve public welfare and reduce poverty. This study highlights the complex interplay between fiscal policies, human capital development, zakat distribution, and economic growth in addressing poverty in the Aceh Province. Further research and policy interventions should consider these relationships to develop more effective strategies for poverty reduction in this region.