Do Digitalization and Innovation Accelerate Productivity? A Comparative Analysis of Four Asian Countries

doi: https://doi.org/10.35536/lje.2024.v29.i2.a4

Muhammad Adnan Khan ,Muhammad Azam Khan and Muhammad Tariq



06
Received
February
2025
11
Revised
May
2025
20
Accepted
May
2025
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Abstract

Productivity growth has remained slow in Asian countries. The study examines the impact of digitalization and innovation on output productivity in four Asian countries: China, India, Bangladesh, and Pakistan, using data from 1990 to 2022. The panel autoregressive distributed lag (ARDL) model was employed to investigate the long-run relationship between the variables. The study implements the Fully Modified OLS (FMOLS) method for robustness checks. The long-run results show that digitalization and innovation have a positive and significant impact on productivity in each country. Human capital, foreign direct investment (FDI), and trade openness also have a significant impact on productivity. The panel ARDL result shows that digitalization, innovation, human capital, trade openness, and FDI significantly affect productivity in the long run. The study recommends encouraging investments in digital infrastructure, inventions, and innovations across various economic sectors, including R&D activities, fostering industry-academia collaborations, and technological advancements. These countries should also invest in education, technical, and vocational training to improve labor productivity and efficiency.

Keywords

Productivity, innovation, digitalization, human capital, FDI, panel ARDL.

Citation:

“Khan, M. A., Khan, M. A., and Tariq, M., (2025). Do Digitalization and Innovation Accelerate Productivity? A Comparative Analysis of Four Asian Countries.” Lahore Journal of Economics, 29 (2), 91–120.

https://doi.org/10.35536/lje.2024.v29.i2.a4