Heterogeneous Effects of Digital Infrastructure on Sustainable Economic Growth: Panel Fixed Effects Evidence from Developing Countries (2014–2025)

Abstract

This research analyses the heterogeneous effects of digital infrastructure on sustainable economic growth in five developing countries (Egypt, India, Kenya, Saudi Arabia and Sudan) using the period 2014–2025. We use panel fixed effects with Driscoll–Kraay standard errors to investigate the effect of internet penetration, mobile broadband and fixed broadband on the GDP per capita growth. Our results suggest that digital infrastructure has a statistically and economically significant impact on economic growth. Internet penetration yields the largest benefits, followed by mobile broadband, whereas fixed broadband is not statistically significant in the full model, which is reflective of limited access in these countries. An exploratory Random Forest analysis with the important caveat of limited sample size suggests that internet penetration is the most important predictor of growth, followed by mobile broadband and human capital. However, these machine learning results should be considered exploratory given the small sample (N = 60, or N = 48 when excluding Sudan) and should not be over-interpreted. Our heterogeneity analysis finds that internet penetration drives growth in middle-income countries (Egypt, India), while mobile broadband drives growth in low-income countries (Sudan, Kenya). The moderation by human capital is large: the marginal impact of internet penetration more than doubles once average education exceeds six years. However, we note that this threshold is illustrative, based on the distribution of the sample, and not necessarily a policy cutoff. The results have implications for SDG 4 (quality education), SDG 9 (infrastructure and innovation) and SDG 10 (inequality reduction). However, with our purposively selected five-country sample, these results are better considered as case-based evidence rather than statistically representative of all developing economies. The stark digital divide is evident in the 87% internet penetration in MENA countries compared to 44% in Sub-Saharan Africa and underscores the need for context-specific policy approaches. We suggest that low-income countries focus on expanding mobile broadband and middle-income countries make complementary investments in internet infrastructure and human capital, but emphasize that these policy suggestions are indicative rather than conclusive.