Enhancing Consumer and Family Economic Well-Being in ASEAN: The Role of Technological Advancement and Institutional Quality in Navigating the Informal Economy

Amir Adnan Abdul Rani, Ruhaini Muda, Azlina Hanif, Arlinah Abd Rashid
Faculty of Business and Management, Universiti Teknologi MARA
Faculty of Business Management and Accounting Research Institute, Universiti Teknologi MARA
Arshad Ayub Graduate Business School, Universiti Teknologi MARA

DOI: https://doi.org/10.60016/majcafe.v32.19


Abstract

This study aims to assess the role of technological advancement and institutional quality in mitigating the formal economy and fostering more inclusive economic well-being for families and consumers in ASEAN countries. This study employed panel data analysis using yearly data for the ten countries in ASEAN, spanning from 2008 to 2018. Findings indicate significant and diverse impacts of technological advancement on the informal economy. The study found that the interaction between technological advancement and economic growth strengthens the relationship between the informal economy across models. The higher economic growth in a country is associated with reduced informal economic activities, as reflected in the principles of modernization theory. The finding further shows the significance of institutional quality in shaping the informal economy. Strong institutional quality helps to create a structured environment that reduces informal economic activities, aligning with neoliberal theory. Governance quality, including the absence of violence and terrorism and the control of corruption, plays a role in mitigating informalities. The study’s primary contribution is its specific focus on the informal economy and the intricacies of ASEAN nations. The study also provides empirical insights into the behavior and determinants of the informal economy in ASEAN nations. Even though the study acknowledges limitations related to data availability and the challenges of quantifying the gig economy, it holds valuable policy implications.

Keywords:  ASEAN countries, Informal economy, Institutional quality, Technological advancement