The internet and poverty alleviation in Indonesia: Urban-rural disparities in a dual economy

Kazuhiko Yokota, Yui Komaki, Ayano Komori, Saki Nagasawa and Satoshi Okuaki

Journal of Asian Economics, 2025, vol. 100, issue C

Abstract: This study investigates the relationship between internet usage and poverty rates in Indonesia by presenting a Two-Sector, Two-Region model, where both urban and rural areas have industrial and agricultural sectors. Using panel data from 2009 to 2022, we classified Indonesia’s 32 provinces as urban or rural areas to analyze whether increased internet usage impacts poverty alleviation differently between these regions. Poverty alleviation in Indonesia was directly correlated with rising internet usage. However, this alleviation is situated primarily in urban areas. This finding aligns closely with the predictions of our model. Internet penetration is near saturation in urban areas, where the industrial sector dominates, limiting its overall effect. Conversely, in rural areas, where the agricultural sector is more prevalent and there remains significant capacity for Internet penetration, increased Internet usage is expected to impact poverty reduction substantially. These results suggest that, particularly in provinces with low urbanization rates, the expansion of Internet infrastructure can serve as an effective tool for poverty alleviation policies.

Keywords: Internet usage; Poverty alleviation; Urban-rural disparities; Indonesia (search for similar items in EconPapers)
JEL-codes: I32 O33 R11 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001484

DOI: 10.1016/j.asieco.2025.102024

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