Digitalization and Labor Productivity: Examining the Paradox in Indonesia's Digital Economy

Bima Prasetya Kumara; Cikit Apriyanti; Yohanes Novi Armunanto

doi:10.63922/ijebir.v5i04.4264

Bima Prasetya Kumara Department of Development Economics, Faculty of Economics and Business, University of Bengkulu, W.R. Supratman Street, Kandang Limun, Bengkulu 38371, Indonesia
Cikit Apriyanti Department of Development Economics, Faculty of Economics and Business, University of Bengkulu, W.R. Supratman Street, Kandang Limun, Bengkulu 38371, Indonesia
Yohanes Novi Armunanto Department of Development Economics, Faculty of Economics and Business, University of Lampung, Bandar Lampung 35141, Indonesia

DOI: https://doi.org/10.63922/ijebir.v5i04.4264

Keywords: Labor Productivity, Digitalization, Indonesian Digital Society Index, Solow Paradox

Abstract

Digital transformation has become one of the key drivers of modern economic change; however, its impact on labor productivity remains uneven across regions. This study aims to analyze the effect of digitalization, measured by the Indonesian Digital Society Index (IMDI) and the Human Development Index (HDI), on labor productivity across provinces in Indonesia. The analysis employs a panel data regression method using the Random Effect Model (REM), based on data from 34 provinces during the 2022–2024 period, sourced from the Ministry of Manpower, the Ministry of Communication and Informatics, and Statistics Indonesia (BPS). The results indicate that IMDI has no significant effect on labor productivity, while HDI has a positive and significant influence. These findings suggest that digitalization in Indonesia still faces a gap between infrastructure availability and its productive utilization, a phenomenon consistent with the Solow Paradox. In contrast, the quality of human capital emerges as a key determinant in enhancing labor productivity.

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