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Incidence of the Digital Economy and Frictional Unemployment: International Evidence

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  • Daniel Lederman
  • Marwane Zouaidi

Abstract

This paper is the first to quantify the relationship between the incidence of the digital economy and long-term frictional unemployment across countries. This paper contributes a novel approach to the literature that had been missing by focusing on the impact of the digital economy on unemployment across a global sample of countries . The resulting evidence indicates that there is a robust, negative partial correlation between national unemployment rates and the incidence of the digital economy, proxied by the share of the adult population that reports using the internet to pay bills. Further, the absolute values of OLS estimates of the partial correlation suggest that it might be higher for developing than high-income economies. Controlling for informal employment appears to be key for removing a positive omitted-variable bias in the estimate of the partial correlation between unemployment and the digital economy, which is due to a negative bivariate correlation between unemployment and informality, and a negative bivariate correlation between informality and the incidence of digital payment. The results from IV estimations suggest that the partial correlation between unemployment and digital payments is negative, with the absolute value of the estimates being larger than the absolute value of the OLS estimates.

Suggested Citation

  • Daniel Lederman & Marwane Zouaidi, 2022. "Incidence of the Digital Economy and Frictional Unemployment: International Evidence," Applied Economics, Taylor & Francis Journals, vol. 54(51), pages 5873-5888, November.
  • Handle: RePEc:taf:applec:v:54:y:2022:i:51:p:5873-5888
    DOI: 10.1080/00036846.2022.2054927
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    1. Shiferaw, Yegnanew A., 2024. "A spatial analysis of the digital gender gap in South Africa: Are there any fundamental differences?," Technological Forecasting and Social Change, Elsevier, vol. 204(C).
    2. Jin, Xing & Lyu, Kangyin, 2024. "The impact of digital economy on emerging employment trends: Insights from the China Family Panel Survey (CFPS)," Finance Research Letters, Elsevier, vol. 64(C).
    3. Xiao Ling & Zhangwei Luo & Yanchao Feng & Xun Liu & Yue Gao, 2023. "How does digital transformation relieve the employment pressure in China? Empirical evidence from the national smart city pilot policy," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-17, December.

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