Impact Of Digital Economy on Pakistan’s Economic Growth

Abstract

The digital economy has become a major engine of global economic growth, revolutionized traditional industries and opened new opportunities for both businesses and individuals. The study aims to assess the impact of the digital economy on Pakistan's economic growth by using Turner’s (2006) bound testing technique of co-integration and Error Correction Model (ECM) methodology. For research purposes, secondary annual time-series data is utilized over the period 1995–2022. Independent variables i.e. mobile cellular subscriptions, percentage of internet usage, fixed broadband subscriptions, gross fixed capital formation, education, and trade openness are selected to analyse the effect on the dependent variable real gross domestic product per capita. Results indicate that internet and fixed broadband penetration significantly boost real GDP per capita in the long run, highlighting the importance of improving access to digital technologies for poverty reduction and economic growth. However, mobile cellular subscriptions significantly impact economic growth in the short run, but their long-term impact is less pronounced. It may be due to several factors i.e. limited technology diffusion, low ICT proficiency among internet users, income inequality, and trade restrictions. Pakistan's government should focus on bridging the digital divide by extending internet access, enhancing digital literacy, and revising trade policies. It will enable citizens to leverage the internet for education and job opportunities, fostering an inclusive digital environment that maximizes economic and social benefits.