The Impact of Digital Economy, Environmental Quality, and Institutional Strength on Industrial Employment in ASEAN: A Panel Data Analysis 2012-2024

Abstract

The industrial transformation across ASEAN is shaped by the rapid rise of the digital economy, growing environmental sustainability pressures, and evolving institutional dynamics. This study aims to examine the impact of the digital economy, environmental quality, institutional strength, GDP per capita, international trade, and inflation on industrial employment in ASEAN countries over the period 2012–2024. Using a panel data regression approach with the Fixed Effect Model (FEM), the analysis draws on secondary data from the World Bank, UN Comtrade, WEF, and the ASEAN Secretariat. The results reveal that the digital economy exerts a positive and significant influence on industrial employment, highlighting the role of digital transformation in expanding job opportunities through efficiency gains and innovation in the manufacturing sector. In contrast, environmental quality—measured by CO₂ emissions per capita—has a negative effect on employment, indicating a trade-off between industrial growth and environmental sustainability. GDP per capita and international trade show positive effects, while inflation negatively affects labor absorption. Institutional strength demonstrates a significant positive impact, suggesting that effective governance and regulatory stability enhance industrial competitiveness. Overall, the findings underscore that the synergy among digitalization, sustainable environmental policies, and institutional strengthening is crucial for fostering an inclusive and resilient industrial sector in the ASEAN region.