Unleashing the potential of mobile broadband: Evidence from Indonesia's underdeveloped regions on its role in reducing income inequality

Abstract

Although numerous studies have explored the relationship between information and communication technology (ICT) and socioeconomic development, limited research has focused on the impact of ICT infrastructure expansion on income distribution. This study aims to fill this research gap by investigating the effect of mobile broadband network coverage on income inequality in underdeveloped regions of Indonesia using unbalanced panel data encompassing 122 second-level subnational regions over the period from 2018 to 2021. This study utilizes map charts to visually depict the disparities in mobile broadband coverage and income inequality across the selected regions and ordinary least squares (OLS) regression on the pooled panel data to estimate the relationship between the two variables. The findings reveal an inverted U-shaped relationship between mobile broadband coverage and income inequality, indicating an adverse effect on inequality during the early stages of network deployment that persists until coverage reaches approximately 60 percent of the population area. Beyond this threshold, the effect becomes favorable in reducing inequality. The findings of this study remain robust even after accounting for potential biases, utilizing fixed and random effect models, and disaggregating the data for the pre- and during-pandemic periods. However, a minor discrepancy in statistical significance is observed when the dataset is disaggregated by the level of regional development. The implications of these findings are discussed, providing theoretical insights and policy/practical implications for addressing income inequality.