Economic Growth Mediates The Effect Of Village Funds And Regional Original Income On Poverty In Districts And Cities In The Province Of Bali

Abstract

This research aims to examine both the direct and indirect effects of Village Funds (VF) and Local Government Revenue (LGR or PAD) on poverty (PV) and economic growth (EG) across regencies and cities in Bali Province. The study’s first objective is to analyze the direct partial impact of Village Funds and LGR on poverty levels. The second objective focuses on identifying the direct partial influence of these two variables on economic growth. The third objective seeks to evaluate the indirect effects of Village Funds and LGR on poverty through the channel of economic growth. A quantitative research design with an explanatory approach is employed. The population consists of all regencies and cities in Bali Province, using a saturated sampling technique that includes nine administrative areas observed from 2017 to 2024. Secondary data for Village Funds and LGR were obtained from the official website of the Directorate General of Fiscal Balance (DJPK), Ministry of Finance of the Republic of Indonesia, while data on poverty (measured by the number of poor individuals) and economic growth (measured by GRDP at constant prices) were collected from the Central Statistics Agency (BPS) of Bali Province. Data analysis was conducted using path analysis with the JASP 0.95.30 software. The results indicate that Village Funds have a positive and significant effect on poverty, suggesting that while these funds contribute to economic activity, they have not yet effectively reduced poverty levels. In contrast, LGR has a negative and significant relationship with poverty, meaning that an increase in LGR can lower poverty rates. Furthermore, both Village Funds and LGR demonstrate a positive and significant impact on economic growth. Economic growth is also found to mediate the relationship between Village Funds and poverty, as well as between LGR and poverty. In conclusion, Village Funds and Local Government Revenue significantly contribute to promoting economic growth across regencies and cities in Bali Province. Therefore, it is recommended that both village and regional governments maximize the efficient use of Village Funds and LGR to strengthen economic growth, as this can serve as an effective mechanism for poverty reduction