Bridging or Widening? Configurational Pathways of Digitalization for Income Inequality: A Global Perspective

Abstract

Digitalization is widely heralded as a catalyst for growth, yet its role in achieving the United Nations’ Sustainable Development Goal 10 (Reduced Inequalities) remains deeply contested. Moving beyond linear assumptions of “digital dividends,” this study adopts a complex socio-technical systems perspective to unravel the configurational pathways linking digitalization to national income inequality. We analyze a high-quality balanced panel of 56 major economies from 2012 to 2022. Employing Panel Fuzzy-Set Qualitative Comparative Analysis (Panel fsQCA) and Necessary Condition Analysis (NCA), this study proposes an evidence-based typology of digitalization-inequality pathways. We reveal that the impact of digital transformation is asymmetric and contingent on geo-economic contexts. NCA identifies Digital Infrastructure, Innovation, and Governance as necessary “bottlenecks” for social equity. Sufficiency analysis uncovers three distinct sustainable development modes: an “Open Innovation Mode” in affluent small economies, driven by global integration and technological frontiers; a “Governance-Regulated Industry Mode” in major economies, where strong state capacity regulates digital industrial scale; and an “Open Niche Mode” for transition economies, leveraging openness to bypass domestic structural deficits. Conversely, we identify a critical “Hollow Governance Trap” in the Global South, where digital governance efforts fail to reduce inequality in the absence of real industrial and infrastructural foundations. These findings challenge one-size-fits-all policies, suggesting that bridging the global digital divide requires context-specific strategies—ranging from synergistic integration to asymmetric breakthroughs—that align digital investments with institutional capacity.