Does Digital Literacy Mediate the Relationship bBetween ICT and Regional Own-Source Revenue?

This study examines the mediating role of digital literacy in the relationship between ICT development and regional own-source revenue across Indonesia’s 34 provinces from 2018 to 2022. The research addresses a critical gap in understanding how digital competencies influence the effectiveness of ICT investments in generating regional revenue. Using structural equation modeling and panel data analysis, the research investigates how three ICT components (infrastructure, usage, and skills) influence digital literacy and regional revenue generation. The study employs comprehensive data from Indonesia’s Central Bureau of Statistics (BPS) and the Ministry of Communication and Information Technology of Indonesia, analyzing both direct effects and mediation pathways. The findings reveal several key insights: First, ICT infrastructure shows an unexpected negative correlation with digital literacy, challenging assumptions about infrastructure investment. Second, both ICT usage and skills demonstrate significant positive effects on digital literacy development. Third, digital literacy positively influences regional own-source revenue. Fourth, digital literacy significantly mediates the relationships between all ICT components and regional revenue, with the strongest mediation effect found in ICT infrastructure. These results suggest that policymakers should adopt an integrated approach combining infrastructure development with programs to enhance ICT usage and skills while prioritizing digital literacy education. The findings contribute to understanding digital transformation’s role in regional economic development and provide evidence-based guidance for bridging the digital divide in developing economies, particularly in the context of Indonesia’s diverse geographical and socioeconomic landscape.