The Impact of Digitization on Economic Activity in Sub-Saharan Africa

Abstract

The digital economy has emerged as a crucial driver of global economic growth, benefiting countries with well-developed information and communication infrastructure. Despite the growing adoption of digitization in Sub-Saharan Africa, the impact on income levels and economic growth remains understudied. This study aims to investigate the impact of digitization on economic activity in Africa Utilizing a two-stages least squares (2SLS) approach on an unbalanced panel data of 33 African countries from 1996 to 2019, the study finds a statistically significant effect of digitization on GDP per capita. Specifically, an increase in the digitization index by one point is associated with a 2.37% increase in GDP per capita. The research delves into the various transmission mechanisms through which digitization can influence economic growth and income levels, providing valuable insights for policymakers and stakeholders. JEL Classification: O11, O30, O47, O55