The Relationship Between Digitalization, Sustainable Development and Government Effectiveness in OECD Countries

Abstract

This study examines the impact of digitalization on sustainable development in OECD countries over the period 2000–2024. Digitalization is measured through a composite index constructed by Principal Component Analysis (PCA) using internet usage, fixed broadband subscriptions, and mobile cellular subscriptions. The Sustainable Development Goals Index (SDGI) is employed as the indicator of sustainable development. Gross domestic product per capita, trade openness, and government effectiveness are included as control variables. The empirical analysis is conducted using the Driscoll–Kraay estimator and panel quantile regression approach. The findings indicate that digitalization exerts a positive and statistically significant effect on sustainable development. Furthermore, the quantile regression results reveal that the impact of digitalization becomes stronger in countries with higher levels of sustainable development performance. These findings suggest that digital transformation constitutes an important driver of sustainable development; however, its effectiveness varies according to countries’ institutional and economic capacities. By employing a PCA-based digitalization index and examining heterogeneous effects across different levels of sustainable development, the study provides new empirical evidence for the OECD countries.