WP3- The quantitative analysis of the causes of observed digital differences among the EU economies and among Southeast Asian economies.
Objectives:
– To study the implications of the digital gap on productivity growth and other economic indicators
– To assess the role of institutional factors and market structure on digitalization
– To econometrically estimate factors that significantly contribute to digital gap
Description:
This work package includes three phases:
(1) The dynamic panel regression analysis of the implications of the digital gap on the productivity growth or other economic performance indicators such as labor and unemployment. Also, growth
accounting (non-parametric) techniques, as well as dynamic panel regression models (parametric approach) will be adopted. In doing so, the digital frontier of the EU-27 countries and the digital gap
(i.e., the distance from the frontier) will be measured for each member country and by the cluster of countries to expand upon the previous literature. The same approach will be implemented for the
estimation of the digital gap between selected Southeast Asian countries or clusters of countries, even though data limitations may inhibit following fully this methodology in the case of Southeast Asian
countries.
(2) The analysis of the role of institutions and market structure in the growth impact of digital goods (ICT). The approach specified above will be further extended to account for institutional factors such as the rule of law, product market regulations, government interventions, and other institutional variables the importance of which has re-emerged in particular during the COVID-19 period. This is
a complementary analysis to the previous productivity growth framework and aims at capturing indirect/spillover effects as suggested by relevant literature15. An interaction analysis will be performed
between the ICT variables and the product market regulation indicators to explore the importance of indirect/spillover effects from ICT. The results of this analysis will show to what extent the institutional and business environment can contribute to alleviating productivity growth differences through their interaction with the ICT.
(3) The panel data econometric estimation of the factors that contribute significantly to the digital gap. To assess the impact of potential factors on digital gap identified in WP1, we will employ the data driven approach based on the model averaging that tackles the model uncertainty, namely the uncertainty in the relevant factors/variables. This approach is used when there are many competing potential models available for estimation, but without sufficient guidance from theory.