IMPACT OF DIGITALISATION ON PRODUCTIVITY GROWTH IN EU MEMBER STATES

Abstract

Recent economic studies on the relationship between digitalisation and economic growth show some ambiguity in the results due to the use of different methods, measures, country samples and time periods. The purpose of this article is to theoretically substantiate, build and econometrically test the model of the impact of digitalisation and other important factors on the growth of total factor productivity in the countries of the European Union for the period of recent years for which data are available. Methodology. The regression analysis of panel data with fixed effects was conducted. The regression estimation of the model is done for 27 EU countries and the entire European Union for the available periods 2017-2022. The robustness of the model to the choice of alternative regression methods, heterogeneity, autocorrelation and random effects is also tested. The model is based on the principles of the endogenous growth theory. The author substantiates and models the relationship of productivity growth with digitalisation, exports, imports, use of intellectual property rights, research and development, foreign investment, human capital and institutions; calculates the indicator of total factor productivity (TFP) based on the Cobb-Douglas function; the European Commission's Digital Economy and Society Index (DESI) is chosen as a measure of digitalisation. Regression results. It is proved that digitalisation is an important factor in productivity growth in the countries of the EU sample, which has a positive and significant impact on total factor productivity (a 1% increase in the digitalisation index leads to an increase in TFP by about 0.1%). Trade openness (exports and imports) was confirmed to remain a key factor affecting productivity. Income from the use of intellectual property rights has a positive, statistically significant impact on TFP growth, although the magnitude of this impact is rather small compared to the impact of digitalisation and trade. It has been found that the quality of institutions can be important for productivity growth, which is an argument for relevant reforms at the level of the government and local communities. The impact of research and development, foreign direct investment, and human capital on TFP growth is difficult to interpret due to the lack of statistical significance of these parameters, which requires further research.