Infrastructure, Digital Connectivity, and Non-Farm Enterprises: Evidence on Household Welfare in Indonesia

Abstract

This study aims to analyze the effects of infrastructure access and household participation in non-agricultural activities on household welfare in Indonesia. The data are derived from the fifth wave of the Indonesian Family Life Survey (IFLS-5), conducted in 2014, using a sample of 5,651 households as the unit of analysis. The findings reveal that internet access, mobile phone ownership, engagement in non-agricultural enterprises, asset ownership, the education level of the household head, and urban residence have significant positive effects on household welfare. In contrast, household size has a negative impact on welfare. Meanwhile, road and electricity access show no significant effect, likely due to their already widespread availability. These results emphasize the importance of digital transformation alongside household economic diversification in promoting welfare improvement. The novelty of this study lies in three main aspects. First, it simultaneously examines the roles of physical infrastructure, digital connectivity, and household participation in non-farm enterprises within a unified analytical framework. Second, it employs nationally representative IFLS-5 household-level data to capture welfare determinants at the micro level. Third, beyond estimating the probability of household welfare using logistic regression, this study further interprets the results through marginal effects, providing clearer policy implications regarding the relative importance of digital connectivity, income diversification, and household characteristics in improving welfare in Indonesia.