Analysis the effect of digital economy on income inequality: A study on six ASEAN countries
DOI:
https://doi.org/10.12928/optimum.v16i2.14966Keywords:
Income Inequality, Digital Economy, ASEAN Countries, Panel Data RegressionAbstract
The rapid development of the digital economy has reshaped labor markets and income distribution, raising concerns over whether digitalization exacerbates or reduces income inequality. While technological progress is often associated with skill-biased effects, digital technologies may also broaden access to markets, information, and economic opportunities, particularly in developing regions such as ASEAN. This study examines the impact of digital economy on income inequality in ASEAN countries and assesses whether the relationship follows a non-linear (U-shaped) pattern. Using panel data from six ASEAN countries (Indonesia, Malaysia, Singapore, Thailand, Vietnam, and Philippines) over the period 2010–2020 (66 country-year observations), the analysis employs fixed-effects panel regression models. A quadratic specification is estimated to test for non-linearity, and potential endogeneity is addressed using a two-stage least squares (2SLS) approach with telecommunication-based instrumental variables. The empirical results indicate that digital economy has a negative and statistically significant effect on income inequality, suggesting an equalizing impact across ASEAN countries. The findings imply that digitalization reduces income inequality by expanding access to digital infrastructure and economic participation, thereby enhancing labor market inclusion and income opportunities for low- and middle-income groups. However, no robust evidence of a non-linear (U-shaped) relationship is found, as the estimated turning point lies outside the observed data range.
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