Digital Technology and Inequality: The Impact on Arab Countries

The focus of this paper is on whether and how digital technologies could lead to a change in inequality over the course of the next decade. The paper is divided into five sections. Section 1 reviews the literature on the international experience with the diffusion of digital technology and trends in key macroeconomic variables, in particular: productivity, the displacement of labor, the worldwide trend in inequality, and how this affects growth. Much of the research is on advanced countries. Nevertheless, it can provide a window into the likely medium- and longer-term trends in Arab countries where digitalization advances. Section 2 examines the spread of digital technology in Arab countries and the impact of digitalization on inequality. As there is considerable heterogeneity among Arab countries, the section differentiates countries according to their capacity for absorbing digital technology. The potential impact of digital technology on jobs and wages in Arab countries and some comparators is tackled in section 3. Section 4 assesses the actual impact on inequality in the recent past and what is probable over the longer term. Section 5 presents suggestions on how Arab countries could maximize the gains from the new technology and cushion the effect on jobs and inequality. Finally, section 6 concludes.