The Impact of Digitalisation and Sustainability on Inclusiveness: Inclusive Growth Determinants

TL;DR

This study analyzes the main factors influencing inclusive growth in Europe from 2000 to 2021, highlighting the roles of digitalisation, governance, and environmental factors, and providing policy insights for sustainable development.

Contribution

It introduces a comprehensive multi-method approach combining PCA and GMM to identify determinants of inclusiveness at the European level, considering digitalisation and sustainability.

Findings

Economic growth and digitalisation positively impact inclusiveness.

CO2 emissions and inflation negatively affect inclusive growth.

Policy recommendations include investments in renewable energy, digital infrastructure, and governance.

Abstract

Inclusiveness and economic development have been slowed by the pandemics and military conflicts. This study investigates the main determinants of inclusiveness at the European level. A multi-method approach is used, with Principal Component Analysis (PCA) applied to create the Inclusiveness Index and Generalised Method of Moments (GMM) analysis used to investigate the determinants of inclusiveness. The data comprises a range of 22 years, from 2000 to 2021, for 32 European countries. The determinants of inclusiveness and their effects were identified. First, economic growth, industrial upgrading, electricity consumption, digitalisation, and the quantitative aspect of governance, all have a positive impact on inclusive growth in Europe. Second, the level of CO2 emissions and inflation have a negative impact on inclusiveness. Tomorrow's inclusive and sustainable growth must include investments in renewable energy, digital infrastructure, inequality policies, sustainable governance, human capital, and inflation management. These findings can help decision makers design inclusive growth policies.