Assessing digitalization and the economy: A dynamic recursive CGE modelling approach

Advanced economies continue to adopt and embed digitalization into their everyday activities. One may ponder; how does a significant digitalization upgrade affect developing economies? To answer this question and highlight the economic & environmental effects of digitalization in a developing economy, this study adopts the singly-country dynamic Energy and Environment Integrated computable general equilibrium model (EEICGE) with a 5-year gradual digitalization policy plan design in Nigeria, a developing economy. The shock simulation comparative statics show digitalization-driven investment opportunities in Nigeria and reveal that digitalization increases productivity and national output levels while leading to a substantial decline in the general price levels in the Nigerian economy. It further strengthens Nigeria's international trade revenue and makes its goods and services cheaper in the international (market) communities. Digitalization of the Nigerian economy also results in a structural shift and decline in on-site labour equilibrium demand/supply that is substituted mainly with capital (machines) but increases online entrepreneurial labour services such as online training sessions/classes, content creations like comedy skits, online sells & delivery services, online skill acquisition sessions etc., aimed at increasing agents' labour income. Thus, digitalization increases the economic agents' consumption, income, and welfare while availing the rich household cohorts, firms, and governments the chance to take advantage of the digitalization-driven investment opportunities financed through decreases in consumption budgets. In the end, this study presents pieces of evidence that favour and support substantial digitalization upgrades in developing economies like Nigeria.