Digitalization as a Factor in Reducing Poverty and Its Implications in the Context of the COVID-19 Pandemic

Abstract

In the present economic context, one of the most important topics of discussion is that regarding sustainable development. According to the agenda developed by the United Nations, one of the most important objectives for the present decade is represented by the list of the Sustainable Development Goals. The Sustainable Development Goals can be divided into five pillars: people, planet, prosperity, partnership and peace. One of the first stipulated goals of the UN agenda is the eradication of poverty and famine. We consider that a significant influence on the eradication of poverty is represented by the development of technology. In this paper, the authors aim to establish a connection between the rate of technological development and the poverty headcount rate. To measure the digital development of the analyzed countries, we decided to compose an index of digital development by taking into account indicators made available by the International Telecommunication Union and the poverty headcount ratio, as was calculated by the World Bank database. This empirical study is of interest for the implications that it has in shaping governmental policies regarding easing the access to digital technology. The method used to quantify the influence of digital development on poverty was the panel data GMM vector autoregressive model for a dataset composed of 35 countries for the period between 2005 and 2018. The results indicate that an increase in digital development will lead to a reduction in the poverty headcount rate. These results imply that by increasing access to technology, countries could help reduce their level of poverty. In this paper, we will also analyze the way in which adopting digital development leads to better economic performance when faced with the COVID-19 pandemic. The results of the present study are of great interest to the scientific community and the public due to the implications of digital development in the field of economics and the combined effect of this phenomenon and the COVID-19 pandemic. We thus conclude that by encouraging digital development and through adopting new technologies, the government can lead to the eradication of poverty. This seems counterintuitive due to the fact that investment in shelter and primary goods can be seen as one of the primary ways of developing the economy. We conclude that better and more consistent results regarding the reduction of poverty can be obtained by increasing the digital development of a country.