The Potential of the Digital Economy for Economic Development: The Case of Georgia

Over the past decades, digitalization became an ever-more important feature of economies around the globe. Associated with this development are many opportunities, but also several challenges, not only for developed, but also for developing countries. In this chapter, we take the perspective of economics and identify the most important structural factors for the exploitation of the potentials digitalization offers. These fall into three groups: availability of an adequate IT infrastructure, high levels of human capital, and an institutional environment which assures effective competition among firms of the digital economy. In reference to selected case studies, we show how governments may actively shape each of these. We then apply these factors to the case of Georgia to identify specific strengths and weaknesses of this developing country, based on available data. We find that, while Georgia has already taken several big and important steps, particularly human capital remains to be insufficiently developed.