Does Internet Use Help Informal Entrepreneur Increase Their Income? Evidence from Manufacturing Sector in Indonesia

Abstract

Manufacturing is a very important field of business in the informal sector. While other business fields experienced a decline in income during the pandemic, informal businesses in the industrial sector recorded an increase in average income during this period. Using National Sosioeconomic Survey (Susenas) 2021 data, this research aims to analyze the role of internet use in increasing the income of informal entrepreneurs in the industrial sector during the last pandemic. Based on the results of an analysis using the endogenous treatment effects model, (1) Informal entrepreneurs in the manufacturing sector who have higher assets, live in urban areas, younger ages, and higher level of education have greater opportunities to use the internet in their business; (2) Informal entrepreneurs in the manufacturing sector who are male have a greater tendency to use the internet for the purpose of seeking information and financial activities; (3) The use of the internet for information search, buying and selling transactions, and financial activities has a positive and significant impact on increasing income; (4) The use of the internet for financial activities has the greatest influence on the income of informal entrepreneurs in the manufacturing sector. Therefore, it is necessary to have policies from related parties to support increased use of the internet through equitable development of infrastructure and the provision of training related to effective and efficient use of the internet that can have a positive impact on business activities.