Abstract: Specific allocation funds to the regions are still needed due to inequality of regional financial capacity. Areas with low financial capability are identical to those underdeveloped regions, which have relatively low levels of economic growth and high level of unemployment. This study analyzes the impact of specific allocation funds on economic growth and unemployment through the regional expenditure mechanism, using panel data from 2010-2015, while the simultaneous equation model is estimated using the Two Stage Least Square (2SLS) method. The results of the study indicate that the Specific Allocation Fund does not affect capital expenditures in the regency areas, but does so in the cities. Specific Allocation Funds have a significant influence on economic growth and unemployment through capital expenditure transmission. Going forward, the government needs to increase.