The impact of digitalization on economic activity in Sub-Saharan Africa

Purpose The purpose of this study is to examine the relationship between digitalization and economic activity in Sub-Saharan Africa (SSA). The study also aims to discuss the effects of digitalization on human capital, financial development, institutional quality and firm-level productivity and how these channels matter for the relationship between digitalization and economic activity. Design/methodology/approach The study employs two-stage least squares (2SLS) on an unbalanced panel data set comprising 33 SSA countries over the period from 1996 to 2019. This methodology addresses the potential endogeneity between digitalization and economic activity. Findings The results indicate that digitalization has a statistically significant positive effect on the level of per capita GDP in SSA countries. Specifically, a one percentage point increase in the digitalization index is associated with a 2.13% increase in gross domestic product per capita. The study discusses some of the channels through which this effect manifests. Originality/value The study comprehensively examines the impact of digitalization on economic activity in SSA. The study also attempts to address the potential endogeneity issues in the relationship and discusses the mechanisms at work.