Digitalization and Inclusive Growth: The Moderating Role of Human Development
DOI:
https://doi.org/10.23917/jep.v27i1.12488Keywords:
Inclusive Growth, Human Development Index, ICT Index, Regional Inequality, DigitalizationAbstract
This study examines the effect of the Information and Communication Technology Development Index (ICT-DI on inclusive economic growth by emphasizing the moderating role of the Human Development Index (HDI). It utilizes provincial panel data of Indonesia from 2017 to 2023. This study employs a panel data regression model with an interaction term, estimated using a random effect approach, to examine the moderating effect of HDI. The findings reveal that digitalization positively affects inclusive growth. However, the moderating effect of HDI is negative and significant. To further examine heterogeneity, the sample is split into two groups based on the 2023 national average HDI as the threshold, and the model is re-estimated separately for provinces above and below this threshold. The split-sample results indicate contrasting dynamics: digitalization has a positive and significant effect on inclusive growth in provinces with low HDI, while it has a negative and significant effect in provinces with high HDI. This suggests that in more developed regions, digitalization tends to favor skilled workers, leading to labor market polarization and reduced inclusivity of growth. These findings highlight the need for context-specific digital policies that consider regional disparities in human development. In lower-HDI provinces, policies should focus on expanding digital infrastructure and access, while in higher-HDI provinces, emphasis should be placed on strengthening digital skills and inclusive labor market policies to mitigate inequality.
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