Is Digital Economy a Good Samaritan to Developing Countries?

Abstract

It is no surprise that the digital economy (DE) has raised expectations and it is still raising them. The aim of this study is to implement testing which will indicate how much the digital economy can help the less developed countries to overcome the economic lag. In order to come up with an answer, the study is based on provocative hypotheses which will elaborate on the development paradox by which the digital economy cannot help the less developed countries. The argument that supports the main hypothesis of this study declares that GDP growth is not equivalent to the growth of investment in DE infrastructure and, therefore, DE is contributing to the increase in inequality instead of reducing it. The paradox is confirmed with the implementation of the SEM modelling on high-income countries (HIC) and middle-income countries (MIC). Moreover, the study measured, i.e., determined, the relative importance and impact of each DE component on the economic growth in HIC and MIC countries. According to the results of this research, in MIC the most significant DE factor which has an impact on GDP growth is the investment in education, whereas in HIC countries infrastructure has the leading part when it comes to economic growth. The final part of this study includes a proposition of a set of guidelines relating to the direction of public policy development in order to make the most of DE’s impact on the creation of a fairer and better system and society. Due to the comprehensive range of questions that come from this study, several topics for future research have been recommended.