HOW MOBILE INTERNET AND E-COMMERCE DRIVE ECONOMIC GROWTH: DISTRICT-LEVEL INSIGHTS FROM INDONESIA

Abstract

Understanding the economic implications of digitalisation is essential for emerging economies undergoing rapid technological advancement. This study examines the influence of digitalisation on economic growth in Indonesia, utilising panel data drawn from 514 districts and cities spanning the years 2019 to 2023. Digitalisation is represented through indicators such as mobile internet usage and e-commerce activity, while investment levels and the dependency ratio serve as control variables. The empirical analysis employs both fixed effects (FE) and random effects (RE) panel regression models to address region-specific, time-invariant characteristics. Results from the preferred FE model indicate that increased mobile internet penetration and e-commerce engagement significantly contribute to improvements in gross regional domestic product (GRDP) per capita. These outcomes highlight the pivotal role of digitalisation in enhancing market connectivity, promoting economic efficiency, and facilitating broader participation in the digital economy. Conversely, investment does not exhibit a statistically significant effect, which may reflect inefficiencies or misdirected allocation of resources. Additionally, a higher dependency ratio is found to impede economic growth, revealing demographic constraints that hinder productive potential in several regions. The study’s findings underscore the necessity of strengthening digital infrastructure, fostering widespread technological adoption, and ensuring coherence between investment and labour market policies to achieve inclusive and sustainable economic development across Indonesia. The insights provided may also offer valuable guidance for digital transformation initiatives in other emerging contexts.