Digitalization and Employment: Lessons from Developed and Developing Economies

This study examines the comparative effects of digitalization on employment in developed and developing economies. Based on available data from the International Labour Organization (2024), the International Telecommunication Union (2024), and the World Bank (2024), 3 different panels have been formed for the period 2000–2023 for the empirical exercises, which use panel data econometric methods. These panels comprise 53 developed economies, 74 developing economies, and 37 developing economies in Asia and the Pacific. The empirical results imply that the employment effect of digitalization across developed and developing economies is diverse. It is observed that the impact of digitalization on employment in developed economies is nonlinear (inverted-U), indicating that the initial effect is positive but that, in the long run, it tends to be negative. However, the impact of digitalization on employment is found to be positive and linear in groups of developing economies and developing Asian economies. More interestingly, compared to the group of global developing economies selected, the extent of the employment impact of digitalization is lesser in developing Asia and the Pacific. In this regard, the relationship between digitalization and job quality may play a pivotal role: past studies evidence that this relationship is crucial in determining whether digitalization leads to job creation or job loss. Brief policy lessons are also discussed based on the study findings.