ABSTRACT

In the economic literature, technological development is critical for productivity and economic growth. As a result of the developments in the digitalization sector in recent years, technological developments have accelerated, productivity and the importance of digitalization has increased for economic growth. In this paper, the impact of digitalization on economic growth in uppermiddle income and lower-middle income developing countries is examined over the period 1995-2020. The results of the analysis for 13 upper- middle income countries and 10 lower middle-income countries are compared with the results of the analysis for 8 countries that were once upper middle-income or lower-middle income countries but have recently been included in the high-income country group. The long-run relationship between the selected variables and per capita income in these countries is tested with the Pedroni panel cointegration test. The impact of digitalization on growth is estimated using the Fully Modified Ordinary Least Squares method, which takes into account heterogeneity in the models, and the Common Correlated Effects method, which takes into account cross-sectional dependence. According to the results, fixed telephone subscriptions per 100 inhabitants, mobile phone subscriptions per 100 inhabitants and the ratio of internet users to the population, which are selected as digitalization variables, have a positive effect on income in the long run for all three country groups. Mobile phone subscriptions are the highest in the high-income group, while fixed telephone subscriptions are the highest in the upper-middle income and lower-middle income country groups. In the high-middle income country group, the coefficient value of the internet variable ranks second, while in the lowermiddle income country group, internet use ranks third and has a negative coefficient. These results indicate that the degree to which ICT variables affect per capita income varies according to the degree of development of country groups.