This paper summarizes the evidence on the growth and distributional effects of digitalization through four channels: average productivity growth, employment and wages, access to markets, and government finances. First, digitalization has increased average productivity growth by better matching demand and supply, improving the efficiency of business processes, and boosting the accumulation of intangible capital. For developing economies, the productivity gains from “smart” automation and artificial intelligence that reduce labor costs may be lower than from the previous wave of information and communications technologies, which improved the matching of sellers to buyers by reducing search and coordination costs. Second, there is little evidence that use of information and communications technologies has reduced aggregate employment or resulted in job polarization in developing economies, unlike the experience of advanced economies. However, distributional challenges within countries might increase to the extent that “smart” robots and artificial intelligence need complementary skills. Third, digitalization has enhanced market access for rural households, small firms, and unbanked populations in developing economies through improving information flows. Fourth, digitalization has improved the efficiency of government spending on, and revenue mobilization for, public services and welfare programs through its effect on transparency, accountability, simplification of bureaucratic processes, and adoption of new delivery models.
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- Citation
- “ Nayyar, Gaurav ; Pleninger, Regina ; Vorisek, Dana ; Yu, Shu . 2024 . Digitalization and Inclusive Growth: A Review of the Evidence . Policy Research Working Paper; 10941 . © Washington, DC: World Bank . http://hdl.handle.net/10986/42243 License: CC BY 3.0 IGO . ”
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- Policy Research Working Papers
- DOI
- http://dx.doi.org/10.1596/1813-9450-10941
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- 34398684
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- 34398684
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- 43
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- United States of America
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- Policy Research Working Paper; 10941
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- WPS10941
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- CC BY 3.0 IGO
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- World Bank
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- https://creativecommons.org/licenses/by/3.0/igo/
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- ProsperityChiefEcoAnalyticalTeam (EFIAT)
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- https://hdl.handle.net/10986/42243
- date disclosure
- 2024-10-15
- region geographical
- World
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Table of Contents
- 1. Introduction 4
- The remainder of the paper is organized as follows. Section 2 reviews the evidence on digitalization and productivity growth, with a focus on the channels on whether the use of digital technologies has enabled better matching of demand and supply, inc... 8
- 2. Digitalization and productivity growth 9
- 2.1 Does digitalization enable better matching of supply and demand? 9
- 2.2. Does digitalization increase the efficiency of business processes? 10
- 2.3. Does digitalization increase capital accumulation? 12
- 3. Digitalization, employment, and wages 13
- 3.1 Does automation reduce the demand for labor? 13
- 3.2 Does automation increase job polarization? 15
- 4. Digitalization and access to markets 17
- 4.1. Does digitalization improve the pass-through of market prices for producers and consumers in rural areas? 17
- 4.2. Does digitalization improve market access for small firms? 17
- 4.3. Does digitalization expand financial inclusion? 18
- 5. Digitalization and public finance 19
- 5.1 Does digitalization improve the delivery of public services? 20
- 5.2 Does digitalization enhance government revenue collection? 21
- 6. Conclusion 22