The Impact of Digital Development on Economic Growth: Empirical Evidence from Selected Arab Countries
DOI:
https://doi.org/10.35516/jjes.v11i1.1259Abstract
Objectives: The main objective of this paper is to evaluate the primary determinants of real economic growth in the Arab region, with a particular emphasis on the role of digital development.
Methods: The study examines the key determinants of economic growth in eight selected countries from the Arab region, using panel data comprising 160 observations from the World Bank database. The data covers the period 2000-2020. An econometric model is utilized to achieve the study objectives by employing economic theory. Advanced econometric estimation methods (FMOLS, panel generalized method of moments GMM, and panel EGLS) are employed to estimate the model parameters. Additionally, as the sum of the elasticity coefficients is less than one, the selected Arab economies exhibit decreasing returns to scale (DRS), necessitating concerted efforts to enhance the productivity of all factors of production and reduce production costs in the long run.
Results: The study's estimation results indicate significant effects of all classical factors of production in promoting economic growth in the selected Arab countries. Specifically, the empirical analysis identifies the main contributors to real economic growth in the Arab region (arranged according to their importance): trade openness, labor productivity, investment (rate of capital accumulation), digital development, and technological progress.
Conclusions: Based on the results, the policy recommendation is that to boost real economic growth, Arab countries should adopt a balanced policy mix designed to promote trade liberalization, investment, labor productivity, and digital development, respectively.
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