This research aims to understand the impact of fiscal decentralization on improving the economy, public welfare, and poverty in the province of Papua. The population and sample of this research were 20 districts/cities in the Papua province. The data analysis used a multivariate model analysis based on the structural equation Modeling WarpPLS variant. The results showed that fiscal decentralization positively influenced the economic growth and the improvement in public welfare, but negatively influenced poverty. Meanwhile, economic growth negatively influenced public welfare. On the other hand, the growth positively influenced poverty reduction, and public welfare influenced poverty. In addition, the results of the mediation test showed that economic growth was able to fully mediate between fiscal decentralization and poverty reduction, yet the economic growth became the partial mediation between fiscal decentralization and public welfare.

The purpose of this research was to study the effect of fiscal decentralization in terms of regional original income, balance funds and special autonomy with economic growth in the province of Papua in 2010-2017. Our results showed a positive relationship between local revenue and economic growth. Positive and significant relationships are aimed at balancing funds, special autonomy funds, and economic growth.

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