The Digital Effectiveness on Economic Inequality: A Computational Approach

This paper addresses the progress of digital skills and technologies and their impact on well-being, income inequality and competitiveness of world countries. In future, the digital progress will contribute to an increase in technology, capital, and finally, production. The digital progress is unequally distributed among world countries. Even if economic growth has raised the living level of world population, income inequality has increased. Social stability potentially could be threatened by this phenomenon. In this paper we will study 121 countries according to their capacity to adopt the latest digital technologies, i.e. how their level of digitalization influences their competitiveness and other indicators, such as human development index, HDI, GDP per capita, and the income distribution measured by Gini index. The associations of digitalization, competitiveness, GDP and inequality are analyzed further to find out the mechanics and potential causal directions. The dataset is acquired from the databases of the World Bank and the United Nations. The methodology consists in two phases. Firstly, cluster analysis is used to divide the world countries into three groups and, secondly, canonical correlation analysis is applied to find the dominant attributes and their correlations with other attributes. The results suggest, for instance, that the digitalization and income equality go hand-in-hand and digital skills are significant predictors of competitiveness, GDP, HDI, as well as inequality.