Impact of digitalization on economic growth in middle and high income countries
Since the fourth industrial revolution (IR 4.0), there is a stark difference in terms of economic growth between high income and middle income countries, where the former exhibits higher economic growth. Simultaneously, there exist a digital divide between these two income groups when...
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| Format: | Thesis |
| Language: | English |
| Published: |
2020
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/89890/1/SPE%202020%2027%20-%20ir.pdf |
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| Summary: | Since the fourth industrial revolution (IR 4.0), there is a stark difference in terms of
economic growth between high income and middle income countries, where the former
exhibits higher economic growth. Simultaneously, there exist a digital divide between these two
income groups when looking at three components of digitalization namely the number of
individuals using the internet, number of mobile cellular subscriptions and fixed broadband
subscriptions. Which begs the question, is it just a coincidence or are these components
contributing toward the growth of these high income countries’ economy? If so, how does other
country with low digitalization try to narrow or close the gap of the digital divide? Therefore,
the first objective of the study is to examine the effects of digitalization on economic
growth, where digitalization is measured by the three components stated above. Also, to reduce the
digital divide, we look at the second objective, which is to identify the determinants of the
digital divide. The Generalized method of moments (GMM) panel data analysis is used to estimate the
model comprising data from more than 120 countries, consist of countries in the high and middle
income groups, from the years 2000 to 2017. The empirical result shows that all component of
digitalization used are positively and statistically significant determinants of economic growth
for both countries in high and middle income. Based on the countries’ income groups,
urbanization, trade openness, age population and human capital are found to be able to
influence the adoption of either one, two or all three of the digitalization components in this
study. At which, policy makers could devise a plan or approach to generate more trade
openness, to incorporate digitalization in workplace and to provide better knowledge
of digitalization, as well as to focus on increasing internet penetration rate. |
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