<![CDATA[Fiscal decentralization aims to improve human development by strengthening local governments' fiscal capacity. However, increased fiscal resources do not always lead to better human development outcomes, particularly in regions with high dependence on intergovernmental transfers. This study examines the effects of Local Own-Source Revenue (PAD) and Intergovernmental Transfers (TKD) on the Human Development Index (HDI) through the mediating role of Regional Expenditure in the districts and municipality of Central Kalimantan Province. An explanatory quantitative approach was employed using panel data from 14 local governments during 2019–2024. Data were analyzed using panel regression and causal mediation analysis. The results reveal that PAD and TKD positively affect Regional Expenditure, with TKD exerting a stronger influence, indicating the presence of the Flypaper Effect. In addition, PAD, TKD, and Regional Expenditure significantly improve HDI, while Regional Expenditure partially mediates the relationship between fiscal capacity and human development. These findings suggest that sustainable human development depends not only on fiscal capacity but also on the effectiveness of public expenditure allocation. The study contributes to the fiscal decentralization literature by integrating Fiscal Federalism Theory, Flypaper Effect Theory, Fiscal Illusion Theory, and Human Development Theory, while providing policy implications for strengthening local fiscal independence and improving the quality of regional expenditure.]]>
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