Impact of Information and Communication Technology (ICT) Infrastructure on Economic Growth and Income Inequality in Indonesia

Abstract

Information and Communication Technology (ICT) plays an important role in supporting economic growth and overcoming income inequality. ICT infrastructure functions to facilitate the use of ICT by economic actors through ICT devices. Previous research used more data between countries or between districts/cities while Indonesia consisted of provinces with different social and economic characteristics. Therefore, the purpose of this study is to analyze the impact of ICT infrastructure on economic growth and income inequality in Indonesia using provincial panel data for the period 2011-2016. The results of the analysis of simultaneous equation models using the Two Stages Least Square (TSLS) method state that ICT infrastructure indicators consisting of cellular telephone ownership, internet accessibility, and the number of Base Transceiver Station (BTS) significantly has a positive impact on economic growth. In addition, these ICT infrastructure variables indirectly have an impact on income inequality through economic growth. Other results obtained are that government spending on ICTs do not significantly impact economic growth and income inequality in Indonesia. The conclusion is that ICT infrastructure has a direct impact on economic growth and an indirect impact on income inequality.