ANALYSIS OF REGIONAL ECONOMIC DEVELOPMENT AND SMART CITY COMPETITIVENESS IN INDONESIA: DIGITAL INFRASTRUCTURE DEVELOPMENT AND REGIONAL LABOR PRODUCTIVITY IN INDONESIA: TESTING THE IT INVESTMENT PARADOX

Selly Kudrati Ningsih; Firsty Ramadhona Amalia Lubis; Lestari Sukarniati; Yunizarrahman; Muhammad Farhan

doi:10.30998/jabe.v12i4.4305

Authors

Selly Kudrati Ningsih State University of Makassar Author
Firsty Ramadhona Amalia Lubis Universitas Ahmad Dahlan Author
Lestari Sukarniati Universitas Ahmad Dahlan Author
Yunizarrahman Sekolah Tinggi Ilmu Administrasi Tabalong Author
Muhammad Farhan Author

DOI:

https://doi.org/10.30998/jabe.v12i4.4305

Keywords:

Digital Infrastructure, Economic Growth, IT Investment Paradox, Labor Productivity, Panel Data, Smart City

Abstract

This study evaluates the structural friction between digital infrastructure expansion and regional economic efficiency across Indonesian provinces from 2020 to 2025. Using a quantitative-descriptive framework, panel data from 34 provinces are analyzed with the Fixed Effects Model to test for the Information Technology investment paradox at the subnational level. The empirical investigation reveals a critical divergence: while digital infrastructure significantly boosts Gross Regional Domestic Product, it has a strong negative impact on labor productivity in regions with low technological readiness. This theoretical anomaly uncovers a profound digital skills mismatch driven by skill-biased technological change and premature industrial automation. Furthermore, the global competitiveness of major Indonesian cities remains stagnant in the 2025 IMD Smart City Index due to highly fragmented data ecosystems and a lack of integrated subnational data governance. This study contributes to the literature by reconciling the inconsistent macroeconomic impacts of information technology. It concludes that local smart city master plans must be structurally unified with national human capital frameworks to mitigate labor displacement and foster inclusive regional growth.

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