Does Special Autonomy Funds Matter for Economic Performance? The Case of Aceh Province, Indonesia

Abstract

This study aims to examine and analyze the effects of special autonomy funds on economic growth, poverty, inequality, and unemployment. It also attempts to study and analyze the effects of economic growth on poverty, inequality, and unemployment in 23 regencies/cities in Aceh Province, Indonesia. Using panel data from 2013-2019 and analyzed using the fixed-effect panel regression technique, this study found evidence that special autonomy funds promoted economic growth and reduced poverty, income inequality, and unemployment. Furthermore, the estimation results showed that economic growth increased poverty, income inequality, and unemployment. The results showed the effectiveness of special autonomy funds in improving the economic performance of 23 districts/cities in Aceh Province, Indonesia. However, economic growth has not been able to reduce poverty, income disparity, and unemployment. This shows the importance of redesigning inclusive economic development by formulating development policies that are pro-poor, pro-job creation, and pro-equal income distribution oriented by involving the active participation of the community collectively in economic development.