Beyond Flexibility: Evaluating the Impact of Gig Work on Household Well-being in Rural and Urban Indonesia

Abstract

Indonesia's digital transformation has driven the rise of platform-based jobs (gig work), particularly in the online transportation, delivery, and freelance services sectors. This work is often viewed as providing flexibility, but its impact on household quality of life remains debated, particularly given the differences between rural and urban conditions. This study aims to analyze how gig work affects household quality of life and examine the disparities in its impact between rural and urban areas. The study used data from the 2023 National Socioeconomic Survey (SUSENAS), which contains information on demographics, employment, household consumption, and access to social security. Gig households were identified based on the presence of household members working in the transportation and digital platform-based services sectors. The analysis was conducted using Lewbel's IV (heteroskedasticity-based instruments) to address potential endogeneity due to unobservable factors such as work preferences or individual abilities. Quality of life indicators were measured through per capita consumption, diversification of nutritious food consumption, and the proportion of education and health expenditures. The results indicate that gig work contributes positively to household consumption in urban areas, but its impact is more limited in rural areas due to limited digital infrastructure and market access. This finding indicates a digital divide in the benefits of the gig economy. By applying Lewbel IV, this study provides a more robust estimate of the impact of gig work, while also providing policy insights regarding the need for social protection interventions, financial literacy, and more equitable expansion of digital infrastructure in Indonesia.