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Apr 9, 2025
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Apr 12, 2025
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Abstract
The majority of MSMEs stayed informal in many developing countries. This has become a problem because it creates a negative impact on government and business itself. Digital transformation has a transformative impact on formalizing SMEs. This transformation needs entrepreneurs to have a certain level of ability and competence in digital literacy. The main objective of this research is to investigate the impact of higher-level digital literacy of entrepreneurs on MSMEs informality. Informality is defined by three characteristics: bookkeeping, legality, and access to credit on bank. Digital literacy is defined by index constructed using Item Response Theory. Using Propensity Score Matching (PSM) to tackle selection bias and using Ordinary Least Square to analyze the impact of digital literacy, our findings show that digital literacy have a statistically significant and slightly more positive impact on legality than impact on access to credit on bank. In addition, we found that the impact of higher digital literacy on informality is significantly more prominent in western side of Indonesia. However, there is a different impact of higher digital literacy on different sectors of economic activities.
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
How to Cite
Sekarranti , L. T. (2025). Impact of Digital Literacy on Informality of MSMES. Jurnal Ekonomi Dan Statistik Indonesia, 5(1), 1-15. https://doi.org/10.11594/jesi.05.01.01
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Zanon, C., Hutz, C., Yoo, H. (., & Hambleton, R. K. (2016). An application of item response theory to psychological test development. Psicologia: Reflexão e Crítica.
Badan Pusat Statistik. (2022). Statistik e-Commerce 2022. Jakarta: Badan Pusat Statistik.
Baker, F. B. (2001). The Basics of Item Response Theory (2nd ed.). (C. Boston, & L. Rudner, Eds.) ERIC Clearinghouse on Assessment and Evaluation.
Bruhn, M., & McKenzie, D. (2014). Entry Regulation and the Formalization of Microenterprises in Developing Countries. The World Bank Research Observer, 29 No. 2, 186-201. Retrieved from https://www.jstor.org/stable/24582415
Dilip, M. (2022, September 25). The Economic Times BFSI. Retrieved from ETBFSI Website: https://bfsi.economictimes.indiatimes.com/blog/fostering-digital-literacy-in-rural-india/94402027
Fajnzylber, P., Maloney, W. F., & Montes-Rojas, G. V. (2011). Does formality improve micro-firm performance? Evidence from the Brazilian SIMPLES program. Journal of Development Economics, 262-276.
Fauzi, F., Antoni, D., & Suwarni, E. (2020). WOMEN ENTREPRENEURSHIP IN THE DEVELOPING COUNTRY: THE EFFECTS OF FINANCIAL AND DIGITAL LITERACY ON SMES’ GROWTH. Journal of Governance and Regulation.
Graham, S. E. (2010). Using Propensity Scores to Reduce Selection Bias in Mathematics Education Research. Journal for Research in Mathematics Education, 41 No.2, 147-168.
Hendrawaty, E., Joan, K., & Adzie, D. P. (2020). The Role of Information Communication Technology (ICT) in Shifting Informal MSMES to Formal MSMES in Indonesia: The Initial Trigger Model. ICEBE. EAI.
International Institute for Management Development. (2022). IMD World Competitiveness Center. Retrieved from IMD Website: https://www.imd.org/centers/wcc/world-competitiveness-center/rankings/world-digital-competitiveness-ranking/
ITU. (2021, December). International Telecommunication Union (ITU). Retrieved from ITU Website: https://www.itu.int/en/mediacentre/backgrounders/Pages/skills-development-digital-economy.aspx
King, G., & Roberts, M. E. (2015). How robust standard errors expose methodological problems they do not fix, and what to do about it. Political Analysis, 159-179.
KOMINFO. (2023). Indeks Literasi Digital Tahun 2022 Meningkat, Kominfo Tetap Perhatikan Indeks Keamanan. Jakarta: Kementerian Informasi dan Komunikasi. Retrieved August 1, 2023, from https://www.kominfo.go.id/content/detail/47179/siaran-pers-no-10hmkominfo022023-tentang-indeks-literasi-digital-tahun-2022-meningkat-kominfo-tetap-perhatikan-indeks-keamanan/0/siaran_pers
Monteiro, J. C. (2012). Coming out of the shadows? Estimating the impact of bureaucracy simplification and tax cut on formality in Brazilian microenterprises. Journal of Development Economics, 105-115.
Nwankpa, J., & Roumani, Y. (2016). IT capability and digital transformation: a firm performance perspective. Thirty Seventh International Conference on Information Systems. Dublin: AIS Electronic Library (AISeL).
OECD/ASEAN. (2020). Formalisation of Micro Enterprises in ASEAN. OECD SEARP. Retrieved from https://asean.org/wp-content/uploads/2012/05/Formalisation-of-Micro-Enterprises-in-ASEAN-POLICY-INSIGHT-2020-final-3.pdf
Oluwakemi, O. T. (2019). Digital Literacy and Entrepreneurial Returns Among Small Business Owners in Lagos State, Nigeria. Education & Science Journal of Policy Review and Curriculum Development.
Oster, E. (2019). Unobservable Selection and Coefficient Stability: Theory and Evidence. Journal of Business & Economic Statistics, 37:2, 187-204. doi:10.1080/07350015.2016.1227711
Prete, A. L. (2022). Digital and financial literacy as determinants of digital payments and personal finance. Economics Letters, 213. doi:10.1016/j.econlet.2022.110378
Rand, J., & Torm, N. (2012). The benefits of formalization: Evidence from Vietnamese Manufacturing SMEs. World Development, 40 No.5, 983-998. doi:10.1016/j.worlddev.2011.09.004
Rosenbaum, P. R., & Rubin, D. B. (1983). The Central Role of the Propensity Score in Observational Studies for Causal Effect. Biometrika, 70 No.1, 41-55.
Rothenberg, A. D., Gaduh, A., Burger, N. E., Chazali, C., Tjandraningsih, I., Radikun, R., . . . Weilant, S. (2016). Rethinking Indonesia's Informal Sector. World Development, 80, 96-113. doi:10.1016/j.worlddev.2015.11.005
Samejima, F. (1969). Estimation of Latent Ability Using a Response Pattern of Graded Scores. Psychometrika Monograph Supplement.
Shinozaki, S. (2022). Informal Micro, Small, and Medium-Sized Enterprises and Digitalization: Evidence from Surveys in Indonesia. ADBI Working Paper 1310. Retrieved from https://www.adb.org/publications/informal-micro-small-andmedium-sized-enterprises-and-digitalization-evidence-from-surveys-in-indonesia
Steiner, P. M., Cook, T. D., & Shadish, W. R. (2011). On the Importance of Reliable Covariate Measurement in Selection Bias Adjustments. Journal of Educational and Behavioral Statistics, 213-236.
Stuart, E. A. (2010). Matching methods for causal inference: A review and a look forward. Statistical Science, 1-21.
Teng, X., Wu, Z., & Yang, F. (2022). Research on the Relationship between Digital Transformation and Performance of SMEs. Sustainability. doi:10.3390/su14106012
Truong, T. D., & Bui, P. C. (2022). The lasting effect of formalization on credit access: Evidence from Vietnamese private SMEs. Finance Research Letters, 47 Part B. doi:10.1016/j.frl.2022.102729
Ulas, D. (2019). Digital Transformation Process and SMEs. Procedia Computer Science, 662-671.
UNESCO Institute for Statistics (UIS). (2018). A Global Framework of Reference on Digital Literacy Skills for Indicator 4.4.2. Montreal: UNESCO Institute for Statistics .
Widiastuti, E., Kurniasih, R., & Martini, S. (2021). CAN DIGITAL LITERACY INCREASE SMEs PERFORMANCE? AN EVIDENCE FROM SMES IN BANYUMAS. International Sustainable Competitiveness Advantages.
Yakob, S., Yakob, R., B.A.M, H.-S., & Rusli, R. Z. (2021). Financial Literacy and Financial Performance of Small and Medium-sized Enterprises. The South East Asian Journal of Management, 15 No.1. doi:10.21002/seam.v15i1.13117
Zahoor, N., Zopiatis, A., Adomako, S., & Lamprinakos, G. (2023). The micro-foundations of digitally transforming SMEs: How digital literacy and technology interact with managerial attributes. Journal of Business Research, 159. doi:10.1016/j.jbusres.2023.113755
Zanon, C., Hutz, C., Yoo, H. (., & Hambleton, R. K. (2016). An application of item response theory to psychological test development. Psicologia: Reflexão e Crítica.