IMF Working Papers

Determinants and Social Dividends of Digital Adoption

Author/Editor:

Utkarsh Kumar ; David Amaglobeli ; Mariano Moszoro

Publication Date:

March 17, 2023

Electronic Access:

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Summary:

We identify key drivers of digital adoption, estimate fiscal costs to provide internet subsidies to households, and calculate social dividends from digital adoption. Using cross-country panel regressions and machine learning, we find that digital infrastructure coverage, internet price, and usability are the most statistically robust predictors of internet use in the short run. Based on estimates from a model of demand for internet, we find that demand is most price responsive in low-income developing countries and almost unresponsive in advanced economies. We estimate that moving low-income developing and emerging market economies to the levels of digital adoption in emerging and advanced economies, respectively, will require annual targeted subsidies of 1.8 and 0.05 percent of GDP, respectively. To aid with subsidy targeting, we use microdata from over 150 countries and document a digital divide by gender, socio-economic status, and demographics. Finally, we find substantial aggregate and distributional gains from digital adoption for education quality, time spent doing unpaid work, and labor force participation by gender.

Series:

Working Paper No. 2023/065

Frequency:

regular