State-led innovation in social policy: Understanding Indonesian government’s commitment to a Matching Defined Contribution pension scheme

This article examines how and why the Indonesian government is pursuing a Matching Defined Contribution (MDC) pension program to extend retirement protection to informal workers. Drawing on the Unified Model of Government Innovation, the study analyses semi-structured interviews with 23 senior policymakers across key ministries and national agencies. The findings show that MDC adoption is primarily driven by policymakers’ recognition of demographic aging, anticipated old-age poverty, and long-term fiscal risk. However, diffusion is constrained by fiscal limitations, interagency coordination challenges, low financial literacy, and public mistrust in pension institutions. Policymakers identify institutional learning from Indonesia’s National Health Insurance program and strategic fiscal reallocation as critical enabling resources. Selective international learning and the integration of complementary policies, such as social pensions and targeted contribution subsidies, are viewed as essential to effective implementation. By analysing innovation at the agenda-setting stage, the study extends diffusion research beyond post-adoption outcomes and demonstrates how governments in economies with large informal sectors navigate organizational constraints, social risks, and external influences when designing inclusive social protection reforms.