The Impacts of Digital Economy on Green Economy: The Indonesian Miyazawa Model

Abstract

This paper aims to identify the impact of the digital economy, the so-called Information and Communication Technology (ICT) sectors, on output growth, CO2 emission, and income distribution in Indonesia. These indicators are so-called green economy indicators. The method of analyzing the output and value-added multiplier of the ICT sectors and the impact of ICT sectors on CO2 emission and income distribution is based on input-output analysis. The multiplier, elasticity, and Miyazawa income distribution analysis will be used. The ICT sectors have high output and value-added multipliers. This condition suggests that any change in the final demand, such as investment in these sectors, will highly impact the output and value-added. Regarding CO2 emission, the ICT sectors contributed to less emission and are mostly regarded as insensitive to CO2 emission, except three of the ICT sectors have elasticity above the average. The impact of the ICT development sectors can worsen income distribution. Policy measures should consider the implication of ICT development as the critical sector with the potential impact of worsening income distribution. Therefore, the government is suggested to encourage ICT sectors with extra concern for social inclusivity to achieve a green economy