The Relationship between Digital Economy and Economic Growth: Econometric Analysis for Selected Arab Countries

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National Center for Social and Criminological Research, Cairo, Egypt

Abstract

The digital economy is a modern and effective variable for economic growth, as it contributes by direct and indirect mechanisms to increasing production and productivity of the various factors of production. In this context, the study seeks to examine the relationship between digital economy and economic growth in 11 Arab countries during 2008-2017. This is based on the theory of endogenous growth, as the econometric model includes an examination of the impact of three variables: capital formation as a percentage of GDP; participation in the labor force as a percentage of population for the age group (15-64); and the technological and digital readiness index representing the digital economy. The results highlight the positive impact of the development in technological and digital readiness on economic growth of the Arab countries under study. The results highlight the importance of increasing investments in technological and digital infrastructure, enhancing human capabilities in the field of information and communication technologies, enacting legislation to protect electronic transactions, in addition to developing digital government, in stimulating the business environment and enhancing confidence and transparency to attract local and foreign investments.

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