Digitalization and Productivity: Evidence on Indonesian Large and Medium Industries

ABSTRACT: This article estimates the relationship between digitalization and labor productivity in the manufacturing sector of a developing country represented by Indonesia. Literature investigating the effect of digitalization on labor productivity in the manufacturing sector is still rare in developing countries. Thus, the present study contributes to filling the gap regarding digitalization and labor productivity in developing countries. It used data of 33,577 large and medium industrial companies in Indonesia in 2017 obtained from the Large and Medium Industry Survey 2017 database, Statistics Indonesia. This study used econometric regression in cross-sectional data with labor productivity as the dependent variable and ICT asset proportion as the primary independent variable, representing the digitalization variable. The findings revealed that digitalization is positively and significantly associated with labor productivity in Indonesia's large and medium industries