Digitalisation and Economic Growth: Evidence from Leading E-Commerce Economies

Abstract

In this study, we examine how digitalisation affects economic growth in the ten major e-commerce economies for the years 1995 to 2024. The study is based on the endogenous growth theory, innovation diffusion theory, and the digital economy framework, exploring the importance of ICT and e-commerce in economic growth, beyond the macroeconomic variables. The cross-sectional and time-series variations are captured through a quantitative panel data approach, with the help of panel least squares estimation. It accounts for a number of domestically relevant factors such as investment, unemployment, inflation, information and communication technology, e-commerce and economic openness, among others, and, therefore, it can evaluate the effect not only of technological factors but also of macroeconomic ones on growth. The empirical results show that digitalisation has a positive and significant impact on economic growth. The positive and statistically significant effects are seen for information and communication technology and e-commerce as a strong driving factor. It can increase market access, lower transaction costs, and increase efficiency. Capital accumulation also has a positive and significant contribution, highlighting its crucial role in driving digital transformation and productivity. Unemployment and inflation, on the other hand, have negative and statistically significant impacts, suggesting that macroeconomic instability and inefficient labor markets have adverse impacts on economic performance. Economic openness also has a positive growth impact through its contribution to trade, competition, and technology transfer. Overall, the results highlight the importance of digitalisation as a key driver of economic growth in the context of well-functioning macroeconomic conditions and complementary policies. The results underscore the need to prioritize investment in digital infrastructure, expand e-commerce, and ensure economic stability to leverage the potential of digital transformation for growth in modern economies.