Digitalization and Poverty Reduction: Case in Indonesia

Abstract

The Indonesian government has set a target of 0 extreme poverty by 2024. Pandemic covid-19 make this target become more challenges. Various strategies have been designed by the government to achieve the poverty target, such as digitalization. The purpose of this article is to estimate the impact of digitalization on poverty reduction and economy growth in Indonesia. Using data from 34 provinces in Indonesia from 2015 to 2020. This article's empirical analysis is based on panel data, Random Effect Model (REM) with an estimation technique of Two Stages Least Square (2SLS). Our results show, digitization has a significant effect on reducing poverty. On the other hand, digitalization has negative impact on economic growth. In order for digitalization to have a major impact in encouraging poverty alleviation, various things are needed, including increasing community capacity and supporting regulations made by the government. Capacity building is carried out so that the community is able to take advantage of digitalization for productive activities so as to encourage increased community welfare. Government policy support is also needed to support the wider use of digitalization.