The primary objective of this research is to analyze the effectiveness of central government fiscal transfers in alleviating poverty within Ma-luku Province, specifically positioning economic growth as a mediating factor. While fiscal transfers have consistently increased, poverty remains a persistent issue in this archipelagic region. By applying the Three-Stage Least Squares (3SLS) method to panel data spanning 11 regencies and cities from 2015 to 2024, this study reveals a critical insight: although transfer funds significantly boost regional economic growth, they fail to directly reduce poverty rates. Economic growth functions as the main transmission channel; however, its impact is not sufficiently inclusive to benefit low-income households. A notable anomaly is observed where Village Funds (DD) exhibit a negative corre-lation with growth, signaling potential institutional bottlenecks. The study concludes that the success of fiscal decentralization depends more on allocation mechanisms and spending quality rather than transfer volume alone. We recommend a strategic reorientation of funds toward productive sectors and strengthening local institutional capacity to achieve meaningful poverty reduction in island-based economies.
Sangadji et al. (2026) studied this question.