Digital Payments and Provincial Growth in Indonesia: The Moderating Role of Labor Informality

Liliana Inggrit Wijaya, Dony Sultan Syarifudin, zunairoh zunairoh

Abstract


Introduction. Digital payments expanded rapidly in Indonesia, but their provincial growth relevance may have depended on labor-market structure. Objective. This study examined whether informal employment share moderated the association between server-based e-money adoption and real GRDP per capita growth. Method. A balanced panel of 34 provinces for 2020-2023 (136 province-year observations) was estimated using two-way fixed effects with province-clustered standard errors. The model included an interaction between mean-centered digital-payment adoption and informal employment share and controlled for education, internet penetration, financial depth, and micro- and small-industry structure. Results. The direct association of server-based e-money adoption with growth was positive but statistically insignificant. The interaction was positive and significant, indicating that the estimated association became stronger as labor informality increased. Marginal effects were significant only at the upper evaluated level of informality. Conclusion. Digital-payment expansion was not uniformly growth-relevant across provinces; its association with growth was stronger where informal employment was more prevalent. Targeted digital inclusion policies should combine payment access with digital skills, merchant integration, and pathways to formal finance.


Keywords


digital payments; economic growth; Indonesia; informal employment; panel data

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DOI: https://doi.org/10.17509/msb.v8i2.104494

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