While literature on digital public infrastructure (DPI) is extensive, the relationship between foundational digital layers and economic growth has only been hypothesized. Framing DPI as a governance instrument, this paper aims to explore the association between foundational digital layers and macroeconomic proxies of structural change.
A novel composite index for foundational DPI (DPIx) is introduced to evaluate (n = 159) DPI’s relationship with economic complexity (ECI) and export diversification (EDI). The DPIx is constructed using sub-indicators from the World Bank’s GovTech Maturity Index, including digital identity, payments and data exchange. Ordinary least squares regressions, incorporating a principal component analysis-derived control for socio-economic development capacity, spline regressions and exploratory instrumental variable analysis (IV) were used.
The central finding of this research is the statistically significant negative association between the DPIx and EDI. That is, the results indicate that countries with more mature foundational DPI tend to exhibit more diversified export profiles, a relationship that persists even after controlling for overall socio-economic development capacity, regulatory quality and trade openness. As such, foundational DPI is a key enabler of export diversification, particularly as countries advance from low to moderate DPI maturity; this calls for strategic investment in DPI as a part of broader development strategies. However, no independent effect of DPIx on ECI was found once broader controls were introduced, and the exploratory IV analysis did not establish definitive causality.
First, this paper adds to the debate on the value of composite indexes, by introducing a transparent, replicable composite DPIx. The thus constructed DPIx offers a more precise insight into the core DPI compared to conventionally used ones. Second, it provides evidence that a relationship between DPI and key indicators of structural economic change exists. Third, it evidence the nature and strength of that relationship.
