Measuring the Effect of the Digitalization

Abstract

Digitalization has changed the rules both in the private and public sectors of the economy. Therefore, the study of its effects has become more relevant. In previous studies, authors mainly focused on the definition of the term, its boundaries and the creation of indexes. The main downside of such papers devoted to this topic is the lack of a quantitative approach. The impacts of digitalization on economic indicators have not been quantitatively investigated in depth. This paper studies the impact of digitalization on the economy, and more specifically on GDP. The first part consists of creating a synthetic index, the Index of Digitalization (ID), which reflects the state of digitalization at the country level. The second part is dedicated to validating the ID using a Panel Data Model, where GDP in previous years is set as a dependent variable that defines a direct connection.