The role of the digital economy and information systems in boosting productivity and efficiency in Western Balkan countries

Abstract

From 2010 to 2024, this research looks at how the Western Balkan countries' use of digital economy and information technologies affected their production and efficiency. Transition economies face challenges in navigating the pros and cons of technological adoption, institutional capacity, and digital inequality as digital transformation reshapes global economic structures. In order to fast-track convergence with the EU and encourage sustainable growth, it is crucial to comprehend how digitization affects economic performance. Kosovo, North Macedonia, Montenegro, Serbia, and Albania are all part of the balanced panel dataset used in the study. We use both static and dynamic econometric methods, such as Generalized Method of Moments (GMM), Fixed Effects (FE), and Random Effects (RE), to make sure our results hold up. A favorable and statistically significant correlation between the digital economy and productivity is shown by the results. The GMM estimation yields a marginally higher coefficient of β = 0.47, which is somewhat higher than the FE model's reported β = 0.42, indicating that digitalization significantly impacts economic performance. Investing in information systems and information and communication technology (ICT) further boosts operational efficiency and productivity. The advantages of digital transformation are further enhanced by human capital and education, which are seen as crucial supplementary elements. Additionally, the results show that the region's digital advancement is not uniform, suggesting that the Western Balkan economies are experiencing a digital gap. To achieve both the short-term and long-term economic convergence with the EU, the research asserts that investments in digital infrastructure, adoption of information and communication technologies, and development of human capital are crucial.