Digital Economy and Economic Growth: Productivity Channels, Global Evidence, and Policy Priorities for an Inclusive Digital Transition

Abstract

The digital economy has become a central component of contemporary economic transformation, but its contribution to growth is neither automatic nor evenly distributed. This article examines the principal channels through which digitalization can influence economic growth and synthesizes recent global evidence on productivity, innovation, employment, human capital, infrastructure, and institutional readiness. The study adopts a structured narrative-review approach drawing on established economic literature, recent peer-reviewed studies, and international policy reports. Three research questions guide the analysis: through which mechanisms does digitalization affect economic growth; why do growth effects differ across countries, firms, and sectors; and which policy conditions are most important for converting digital adoption into inclusive and sustainable economic gains? The review finds that digital technologies can raise productivity by lowering transaction and coordination costs, improving information use, enabling automation, expanding market access, and accelerating innovation. However, recent evidence also shows that productivity effects may be heterogeneous and nonlinear, particularly where firms lack complementary organizational capabilities, skills, finance, or absorptive capacity. Digital infrastructure and broadband remain foundational, while human capital and digital skills determine the extent to which firms and workers can exploit technological opportunities. Artificial intelligence, cloud computing, data analytics, and digital platforms are likely to strengthen these channels but may also intensify labor-market adjustment, market concentration, cybersecurity risks, and digital inequality. The article proposes an integrated policy framework centered on infrastructure, diffusion, skills, innovation capacity, institutional quality, and inclusion. It concludes that digitalization should be understood as a complementary-capabilities process rather than a stand-alone technological shock: long-term growth depends on how effectively digital technologies are combined with human capital, organizational change, competition, and responsive public policy.