The Effect of Local Revenue, General Allocation Fund and Special Allocation Fund on Poverty Through Economic Growth in Aceh Province, Indonesia

Aceh Province faces serious challenges related to poverty that require special attention to improve people's welfare. Various efforts have been made by the Aceh government to reduce poverty, but the poverty rate in Aceh Province is still relatively high compared to other provinces in Sumatra. This study analyses the effect of local revenue, general allocation funds, and special allocation funds on poverty through economic growth in districts/cities of Aceh Province. Quantitative methods of path analysis and panel data regression models were used to analyse panel data from 23 districts/cities in Aceh Province for 2015-2023. The results showed that in Model I, local revenues had a positive effect on economic growth, general allocation funds had no effect on economic growth, and special allocation funds had a positive effect on economic growth. Furthermore, in Model II, local revenue has a negative effect on poverty, general allocation funds have a positive effect on poverty, and special allocation funds have no effect on poverty. In Model III, economic growth has a negative effect on poverty. Economic growth mediates the relationship between local revenues and special allocation funds on poverty. The government needs to implement policies that optimise revenues to increase regional fiscal independence, improve local economic growth and reduce poverty.