The impact of digitalization on economic activity in Sub-Saharan Africa

Tilahun Molla Emiru and Temesgen Wajebo

Journal of Economic Studies, 2025, vol. 53, issue 1, 1-15

Abstract: PurposeThe purpose of this study is to examine the relationship between digitalization and economic activity in Sub-Saharan Africa (SSA). The study also aims to discuss the effects of digitalization on human capital, financial development, institutional quality and firm-level productivity and how these channels matter for the relationship between digitalization and economic activity.Design/methodology/approachThe study employs two-stage least squares (2SLS) on an unbalanced panel data set comprising 33 SSA countries over the period from 1996 to 2019. This methodology addresses the potential endogeneity between digitalization and economic activity.FindingsThe results indicate that digitalization has a statistically significant positive effect on the level of per capita GDP in SSA countries. Specifically, a one percentage point increase in the digitalization index is associated with a 2.13% increase in gross domestic product per capita. The study discusses some of the channels through which this effect manifests.Originality/valueThe study comprehensively examines the impact of digitalization on economic activity in SSA. The study also attempts to address the potential endogeneity issues in the relationship and discusses the mechanisms at work.

Keywords: Economic development; Economic activity; Digitalization; Sub-Saharan Africa; Human capital (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-06-2024-0383

DOI: 10.1108/JES-06-2024-0383

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