Luohan Academy

Why We Study Digital Technology and Inclusive Growth

AN INTRODUCTION OF "DIGITAL TECHNOLOGY AND INCLUSIVE GROWTH" BY LUOHAN ACADEMY

In 2018, the number of internet users exceeded four billion, representing more than half of the world’s population. More than 60 percent of the population across low-income countries now have mobile phones. Digital technologies have generated broad benefits for both private and public sectors – communication, connection, and information acquisition have never been so easy.

As societies adapt to these technologies, there remains a lot to learn about how they promote inclusive growth, an essential element in the United Nations’ Sustainable Development Goals. Inclusive growth is about advancing equitable opportunities for all economic participants, from workers, households, and firms to entire countries. Inclusive growth has also become vital as the labor share in output has been declining in the past decades and inequality increasing, particularly in developed countries. How to better turn technological development into more opportunities for all demands our attention and effort.

In this program, the Luohan Academy aims to bring forth new insights on the relationship between digital technologies and inclusive growth. Together with academia, policymakers, and business leaders, the Academy is generating ideas for how to harness the benefits of digital development so that societies may be better positioned to embrace the changes it brings.

In general, we would address these questions within this program:

1. How does digital technology transform economic activity?

The main features of a digital technology are: 1) a low threshold for adoption, 2) low user cost, and 3) non-rivalry, meaning one’s use of the services does not exclude that of others. These features together enable in digital technologies the ability to transform economies. The evidence shows that digitalization brings wider connections by allowing consumers to reach goods in distant places, particularly in the e-commerce world. Using such technologies to collect and share information can build trust between merchants and consumers, and increase matching efficiency. It also facilitates smarter decision-making through the added knowledge of both demand and supply sides.

How and to what extent digital technologies have transformed patterns of trading, consumption, financing, employment, and other economic activities – this is the first question we seek to address in this program.

2. What is the impact of digital technologies on inclusiveness?

The rapid spread of digital technologies in developing countries has brought benefits to the young, the female, the “startup”, and the remote in under-developed regions – in other words, those who previously were less included in economic life. At the same time, the advancement of these technologies has also led to unanticipated consequences sowing division: the displacement of jobs and rapid shifts in required skills, privacy and data security, as well as issues related to competition policy.

How to properly evaluate the impact of digitalization remains challenging work. Joseph Schumpeter describes innovation as a “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, [and] incessantly creating a new one”. It is therefore imperative that we understand how inclusiveness and the distribution of opportunities are affected by new technologies.

3. How can we harness digital inclusiveness?

The world is not flat in terms of economic growth. Given the fast pace of development of digital technologies, the benefits have so far not been shared equally among countries and populations. Some countries were faster to adopt and reap benefits – like China and its e-commerce sector, or Kenya’s experience with the M-Pesa money transfer service – while other areas have not seen such growth.

How to harness digital inclusiveness is an important but challenging area of research. What prerequisites are essential for technological adoption? How can private and public sector coordination be promoted in order to mitigate possible adverse impacts? Can this be done while increasing digital inclusiveness simultaneously? These are the questions the Academy seeks to tackle.

 

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