Abstract
PurposeThe entire world is now witnessing the Fourth Industrial Revolution and Artificial Intelligence (AI) is indeed altering the lives of the many in both developing and developed countries. Massive digital transformations are affecting the economies of those countries and are bringing with them many promised merits, as well as many challenges to face. This paper aims to examine the relationship between digital transformation (as a one facet of the fourth revolution and AI trends) on one side, and economic development, labor productivity and employment on the other side.Design/methodology/approachThe paper analyzes different indices of digital transformation, and then uses the Digital Evolution Index (DEI) to study those relationships in a group of developing countries using feasible generalized least squares method (FGLS).FindingsThe results show a positive relationship between the digital transformation index and economic development, labor productivity and job employment. Females seem to gain more from digital transformation compared to males, as suggested by the positive relation with the first and the insignificant relation with the latter. The relationship with vulnerable employment is not significant; more evidence is still needed to judge whether digital transformation will have an impact upon the vulnerable employees in the economy.Research limitations/implicationsThe paper focused on the impact of digital transformation upon total aggregate employment. Future research is still needed to examine the impact upon the structure of the labor market and the shift of occupations.Originality/valueThe paper aims to add to in the literature regarding the relationship between digital transformation, economic development, employment and productivity in the developing world. The implications of those relationships are of significant importance to policymakers regarding how much support should be given to encourage the digital transformation. At the same time, it shall also indicate how much social support policies are required – if any – to lessen the negative impact of digital transformation on the vulnerable groups inside the country. Another contribution is using a single composite index for digital transformation that is comparable across the chosen set of developing countries, instead of using single indices each capturing a different dimension of digital transformation.
Highlights
In the era of the Fourth Industrial Revolution, Artificial Intelligence and Digital Transformation, a major concern for both economists and policy makers has been the impact of those major changes on the way the economy functions
This paper aimed to examine the relationship between digital transformation on one side and economic development, labor productivity and job employment on the other side
The first is the descriptive analysis to compare between different indices of digital transformation and analyzing their relations to the selected macroeconomic variables in a group of developing countries
Summary
In the era of the Fourth Industrial Revolution, Artificial Intelligence and Digital Transformation, a major concern for both economists and policy makers has been the impact of those major changes on the way the economy functions Those changes are expected to affect, among others, the rate of development of the economy, employment rate and labor productivity. The paper is interested in examining the impacts of digital transformation upon the sample of developing countries and come up with relevant and interesting implication for those countries. Another contribution is using a single composite index for digital transformation that is comparable across the chosen set of developing countries, instead of using single indices each capturing a different dimension of digital transformation. The used index is the digital evolution index (DEI) which reflects the overall stance of digital transformation inside the country and takes into consideration both the supply and demand sides of digital transformation
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