The Impact of the Digital Economy on Productivity in Iranian Provinces (QVAR Approach)

Document Type : Research Paper

Authors

1 Associate Professor, Department of Economics, Payame Noor University, Tehran, Iran

2 Assistant Professor, Department of Economics, Payame Noor University, Iran

3 Instructure, Department of Library and Information Science, Payame Noor University, Tehran, Iran.

Abstract

This research aims to investigate the impact of the digital economy on Total Factor Productivity (TFP) in the provinces of Iran. It employs a Quantile Vector Autoregression (QVAR) approach based on the Diebold and Yilmaz (2012) framework. Annual panel data for 31 provinces spanning the period of 2012 to 2022 (1391 to 1401 solar Hijri years) were collected. Variables analyzed include the productivity index, the number of fixed and mobile phone subscribers (phnsub and mobsub), financial transactions, electronic payments, sanctions, the digital economy index (DIGECO), and electronic banking (EBANK). The analysis was conducted at the 25th, 50th, and 75th percentiles (quantiles), examining the spillover effects of fluctuations under normal, low, and crisis conditions. The results indicate that the overall connectivity index has the highest value (71.69) at the 50th percentile, suggesting greater stability under average conditions. The variables DIGECO and EBANK generally act as transmitters of fluctuations, while phnsub and mobsub are receivers. Following a technology shock (2016/1395), productivity's dependence on digital infrastructure increased, and provincial disparities were exacerbated. The analysis showed that the digital economy enhances productivity through knowledge spillover by up to 15%, especially in regions with stronger digital infrastructure. Furthermore, sanctions, as an exogenous factor, negatively impact the connectivity of variables in the higher quantiles. These findings align with previous studies, such as those by Brynjolfsson (2017) and Zhang (2022), emphasizing the positive effect of the digital economy on TFP, despite challenges like the productivity paradox and sanctions.

Keywords

References

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Innovation Economic Ecosystem Studies
Volume 5, Issue 2
June 2025
Pages 1-34

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