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Global digital transformation: discovering the impact of digitalization on income inequality in OECD countries, the moderating role of globalization

Author

Listed:
  • Emmanuel Baffour Gyau

    (Jiangsu University)

  • Yaya Li

    (Jiangsu University)

  • Michael Appiah

    (Jiangsu University)

Abstract

Digitalization is transforming global economies by redefining the dynamics between technological advancement and globalization, significantly influencing income disparity and emphasizing the necessity of balancing inclusivity with the potential dangers of unregulated digital growth. Therefore, this study examines the impact of digitalization on income inequality across 31 OECD countries, utilizing panel data from 2004 to 2021 and the two-step system GMM methodology. The findings reveal that while digitalization initially reduces income inequality, it follows a U-shaped trajectory, indicating that unchecked digital growth may eventually exacerbate income disparities. Globalization, driven by trade openness and foreign direct investment, not only reduces income inequality but also moderates and enhances the reduction effect of digitalization on income inequality. Causality tests indicate bidirectional relationships between digitalization, globalization, and income inequality. Policymakers should adopt adaptive digital assessments, establish thresholds for digitalization, promote fintech-inclusive solutions, integrate trade and digital policies, and foster international agreements.

Suggested Citation

  • Emmanuel Baffour Gyau & Yaya Li & Michael Appiah, 2025. "Global digital transformation: discovering the impact of digitalization on income inequality in OECD countries, the moderating role of globalization," Economic Change and Restructuring, Springer, vol. 58(1), pages 1-37, February.
    • Handle: RePEc:kap:ecopln:v:58:y:2025:i:1:d:10.1007_s10644-024-09843-2
    DOI: 10.1007/s10644-024-09843-2
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