Speaker
Description
Introduction:
Indonesia’s economic landscape is heavily influenced by the significant presence of micro, small, and medium enterprises (MSMEs). According to the 2016 Economic Census, a staggering 99 percent of the country’s firms fall into the MSME category. A substantial portion of these enterprises operates informally, with informality shares amounting to approximately 65 percent between 2018 and 2021. Notably, the food, beverage, and accommodation sector hosts around 42 percent of these informal MSMEs, encompassing a diverse range from street vendors to established eateries (Hapsari et al., 2023; BPS, 2022).
In the context of developing economies, entrepreneurship, particularly through MSMEs, appears as a potential panacea for poverty alleviation, premised on the capitalist assumption of higher income prospects and job creation (Filippinni, 2021). Within this framework, entrepreneurship becomes a pathway to poverty alleviation. Moreover, Nirathron (2006) asserts that MSMEs, particularly those in the food and beverage sector like street vendors, act as significant absorbers of surplus labor, notably unemployed women.
Simultaneously, the advent of innovative digital platforms has ushered in a new era in Indonesia, driven by increased smartphone ownership and internet access. Among these, food delivery applications have rapidly gained traction, with platforms like Go-Food revolutionizing consumption behavior since their inception in 2015. Tenggara Strategics (2022) reports that approximately 35.5 percent of smartphone users in Indonesia, totaling around 67.2 million users in 2022, engage with the Go-Food application, generating an annual revenue of approximately 30.7 trillion IDR in 2022 alone. Beyond their substantial market influence, these platforms offer MSMEs in the food and beverage sector an avenue to join their network, granting access to a broader consumer base within a 25-kilometer radius, thus potentially expanding their market reach.
While existing literature has predominantly explored the impact of online food delivery on nutrition transitions and dietary patterns in Indonesia, there exists a notable gap regarding research on the potential of flourishing food and beverage MSME entrepreneurship and its broader implications for poverty alleviation. Hence, this study seeks to bridge this gap by examining the role of online food delivery, particularly through leading platforms like Go-Food, in fostering food entrepreneurship and augmenting overall labor market incomes.
The primary aim of this paper is to quantify the potential impact of online food delivery platforms on entrepreneurship and poverty alleviation through income generation. The hypothesis posits that the proliferation of entrepreneurship hinges on the availability of higher-income markets in urban or peri-urban environments in close proximity of economically disadvantaged neighborhoods where food MSMEs are situated, thereby attracting customers with greater purchasing power. Consequently, the main research questions are as follows: (1) Did enhanced market access facilitated by food delivery platforms contribute to the growth of food entrepreneurship in Indonesia? (2) Did this growth result in an increase in the number of laborers employed in the food sector? (3) Did villages surrounded by higher-income areas benefit from reduced trade barriers through food delivery platforms? (4) Did this initiative succeed at alleviating poverty, and fostering food entrepreneurship in lower-income villages?
Methodology and dataset
The preliminary analysis combines data from the Indonesian Labor Force Survey (SAKERNAS) and the Indonesian Household Socio-Economic Survey (SUSENAS) to generate indicators of socio-economic status, labor market as well as nutrition outcomes, food consumption behavior, and entrepreneurship activity in Indonesia between the year of 2010 to 2022. The presence of Go-food services in any district is collected using web-scraping. The company started serving 5 cities at its inception in 2015 and expanded its operations to 73 cities by 2022. This gradual roll-out of Go-Food services is the main treatment variable in this study. Lastly, Indonesian Village Census data (PODES or Potensi Desa) from Indonesian Statistics (Badan Pusat Statistik) is utilized to complement the survey data with village-level measures of socio-economic conditions, demography and geographical characteristics, from 2014 to 2021.
This study will employ an event study design (staggered difference-in-differences) with permanent roll-out at a different timeline based on Clarke and Schyte (2021), estimating the following regression:
LOi,t represents labor market outcome variables in district i and year t, including the (a) the employment rate in the food and beverage sector within the district (per 1,000 of local inhabitants), (b) the number of entrepreneurs (self-employed) in the food and beverage sector (per 1,000 of local inhabitants), and the (c) natural logarithm of labor market incomes in the food and beverage sector. The treatment variable takes one starting with the year when Go-Food has been introduced within the district capital and zero otherwise. In our baseline specification, ωi is the district fixed effect, which controls for average time- invariant differences across Indonesia’s districts, while θt is the year fixed effect that captures common nation-wide trends in employment and food consumption. γit is controlling for the district-specific linear trends. The error terms ϵi,t are clustered at the district level.
Preliminary Findings
The initial results indicate a 13.7% increase in real wages in the food and beverage sector immediately and in the medium term following the introduction of Go-Food. However, this effect is not significant in rural areas due to limited sample size. Moreover, there is a modest but statistically significant growth rate of 1.8% in food and beverage entrepreneurship post-rollout.
This paper offers insights for scholars and Indonesian policymakers, serving as a starting point for further research into the effects of the digital revolution via online food platforms on labor markets and poverty alleviation.
Keywords: Online Food Delivery, Go-Food, MSME, Food Entrepreneurship, Poverty Alleviation, Market Access, Food System, Indonesia
List of References
BPS. (2022). Proportion of informal employment in total employment by education level - statistical data. BPS. https://www.bps.go.id/en/statistics- table/2/MjE1NyMy/proportion-of-informal-employment-in-total-employment- by-education-level.html
Clarke, D., & Tapia-Schythe, K. (2021). Implementing the panel event study. The Stata Journal: Promoting Communications on Statistics and Stata, 21(4), 853–884. https://doi.org/10.1177/1536867x211063144
Filippini, Federica. (2021). Sustainability in the last mile online food delivery: an important contribution using the case study of “Glovo”
Hamflett, A. (2018, March 7). Challenging food poverty in the Digital age. LinkedIn. https://www.linkedin.com/pulse/challenging-food-poverty-age-andy-hamflett
Nirathron, N. (2006) Fighting Poverty from the Street – A Survey of Street Food Vendors in Bangkok.
