Politická ekonomie X:X | DOI: 10.18267/j.polek.1542

Digital Transformation and Economic Inequality: Trends, Clusters, and Policy Impacts Across Economies

Licong Xing, Ke Xu, Chengdi Luo, Yaoyi Zhang, Michal Basta
Licong Xing, School of Economics and Management, Nanyang Normal University, Nanyang, China
Ke Xu, School of Economics, Management and Law, Jiangxi Science and Technology Normal University, Nanchang, Jiangxi, China
Chengdi Luo (corresponding author), College of Agriculture, Guangxi University, Nanning, Guangxi, China
Yaoyi Zhang, School of Economics and Management, Nanyang Normal University, Nanyang, China
Michal Basta, Polish Chamber of Work Safety at Height Jana Matejki, Nowy Sacz, Poland

Digital transformation is reshaping economic structures worldwide, yet its implications for income inequality remain debated. This study examines the relationship between digital readiness (DR) and income inequality across twelve advanced and emerging economies from 2005-2024. Using panel regression, clustering, and machine learning approaches, the study explores trends, structural country groupings, and the determinants of inequality. The results reveal heterogeneous dynamics: emerging economies often experience inequality reductions as digital readiness improves, whereas the effects in advanced economies are weaker or insignificant. Fixed-effects models suggest that short-run increases in digital readiness may temporarily coincide with higher inequality. Clustering identifies two structural groups of countries with distinct digital and socioeconomic profiles. Overall, the findings suggest that digital transformation alone is insufficient to reduce inequality and must be complemented by policies promoting affordable connectivity, digital skills, and inclusive institutions.

Keywords: Digital readiness, income inequality, fixed effects panel regression, machine learning, cluster analysis

Received: August 14, 2025; Revised: November 16, 2025; Accepted: December 1, 2025; Prepublished online: May 2, 2026 

Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Adam, I. O., Alhassan, M. D., Shaibu, A., Abdul Mumin, M., Abdulai, I. (2025). The effects of digital transformation on inequality: does the mediating effects of digital inclusion and ICT regulatory environment matter? Journal of Innovative Digital Transformation. https://doi.org/10.1108/JIDT-04-2024-0007 Go to original source...
    2. Antonelli, C., Tubiana, M. (2023). The rate and direction of technological change and wealth and income inequalities in advanced countries. Technological Forecasting and Social Change, 191, 122508. https://doi.org/10.1016/j.techfore.2023.122508 Go to original source...
    3. Ateeq, A. (2024). Emerging economies and digital transformation: Opportunities and challenges. Business Sustainability with Artificial Intelligence (AI): Challenges and Opportunities: Volume 1, 129-136. https://doi.org/10.1007/978-3-031-71526-6_12 Go to original source...
    4. Baffour Gyau, E., Li, Y., Appiah, M. (2025). Global digital transformation: discovering the impact of digitalization on income inequality in OECD countries, the moderating role of globalization. Economic Change and Restructuring, 58, 6. https://doi.org/10.1007/s10644-024-09843-2 Go to original source...
    5. Baller, S., Dutta, S., Lanvin, B. (2016). Global information technology report 2016. Geneva: Ouranos.
    6. Bank, W. (2021). World development report 2021: Data for better lives. Washington, D.C.: World Bank.
    7. Bayumi, M. R., Brutu, D., Agustina, R., Jaya, R. A. (2024). Transforming economies: Navigating global challenges in the digital era. Journal of Economics and Development, 1, 28-45. https://doi.org/10.70656/jend.v1i2.172 Go to original source...
    8. Chari, S. G. (2024). Bridging gaps, building futures: Tackling socio-economic disparities through education and technology. London Journal of Research In Humanities and Social Sciences, 24, 1-12.
    9. Cheng, K., Liu, S., Teng, M. (2025). Towards the Equalization of Basic Public Services in Chinese Cities: Investigating the Role of Urban Polycentric Structure. Applied Spatial Analysis and Policy, 18, 143. https://doi.org/10.1007/s12061-025-09747-2 Go to original source...
    10. Christanti, M. F., Mawangir, M., Arevin, A. T., Ramadhan, I., Limijadi, E. K. S. (2024). The digital divide in education: Bridging gaps in the era of online learning. Migration Letters, 21, 1070-1079.
    11. Confetto, M. G., Covucci, C. (2024). Assessing the impact of Digital Sustainability on Inclusive Economic Growth: a comprehensive review. Journal of Financial and Monetary Economics, 12, 240-251.
    12. Conway, P. (2015). Digital transformations and the archival nature of surrogates. Archival Science, 15, 51-69. https://doi.org/10.1007/s10502-014-9219-z Go to original source...
    13. Deganis, I., Haghian, P. Z., Tagashira, M., Alberti, A. (2021). Leveraging digital technologies for social inclusion. United Nations Department of Economic and Social Affairs, 1-6.
    14. del Carpio, X., Cuesta, J. A., Kugler, M. D., Hernández, G., Piraquive, G. (2022). What effects could global value chain and digital infrastructure development policies have on poverty and inequality after COVID-19? Journal of Risk and Financial Management, 15, 43. https://doi.org/10.3390/jrfm15020043 Go to original source...
    15. Doloi, H. K. (2025). Digital Inclusion for Rural Growth: Internet Usage and Smart Villages Development. Asia-Pacific Journal of Rural Development, 35, 40-57. https://doi.org/10.1177/10185291251343357 Go to original source...
    16. Du, W., He, Q., Cao, T., Wu, J. (2025). Intellectual property protection and platform digitalization empowering technology entrepreneurship in emerging markets. Operations Research Letters, 107367. https://doi.org/10.1016/j.orl.2025.107367 Go to original source...
    17. ElMassah, S., Mohieldin, M. (2020). Digital transformation and localizing the sustainable development goals (SDGs). Ecological Economics, 169, 106490. https://doi.org/10.1016/j.ecolecon.2019.106490 Go to original source...
    18. Feng, J., Qi, S. (2024). Digital infrastructure expansion and economic growth in Asian countries. Journal of Business and Economic Options, 7, 27-32.
    19. Friederici, N., Wahome, M., Graham, M. (2020). Digital entrepreneurship in Africa: How a continent is escaping Silicon Valley's long shadow. The MIT Press. https://doi.org/10.7551/mitpress/12453.001.0001 Go to original source...
    20. Gao, H., Hsu, P. H., Zhang, J. (2023). Pay Transparency and Inventor Productivity: Evidence From State-Level Pay Secrecy Laws. The RAND Journal of Economics. https://doi.org/10.1111/1756-2171.70005 Go to original source...
    21. González, J. I., Porciuncula, L., Paltridge, S. (2016). Broadband Policies for Latin America and the Caribbean: A Digital Economy Toolkit. Paris: OECD Publishing.
    22. Guha, A., Mukerji, M. (2021). Determinants of digital divide using demand-supply framework: Evidence from India. Australasian Journal of Information Systems, 25. https://doi.org/10.3127/ajis.v25i0.3029 Go to original source...
    23. Hassan, K., Naoual, O. T. (2024). Leveraging technology for equity: A literature review on e-inclusion and its potential to advance young people's socioeconomic inclusion. Revue Internationale de la Recherche Scientifique, 2, 1936-1952.
    24. Hong, Q., Jiao, X., Qiu, X., Xu, A. (2024). Investigating the impact of time allocation on family well-being in China. Journal of Business Economics and Management, 25, 981-1005. https://doi.org/10.3846/jbem.2024.22252 Go to original source...
    25. Imran, A. (2023). Why addressing digital inequality should be a priority. The Electronic Journal of Information Systems in Developing Countries, 89, e12255. https://doi.org/10.1002/isd2.12255 Go to original source...
    26. Inegbedion, H. E. (2021). Digital divide in the major regions of the world and the possibility of convergence. The Bottom Line, 34, 68-85. https://doi.org/10.1108/BL-09-2020-0064 Go to original source...
    27. Jiang, S., Yuan, X. (2025). Does green credit promote real economic development? Dual empirical evidence of scale and efficiency. PloS One, 20, e0326961. https://doi.org/10.1371/journal.pone.0326961 Go to original source...
    28. Katz, R., Callorda, F. (2018). Accelerating the development of Latin American digital ecosystem and implications for broadband policy. Telecommunications Policy, 42, 661-681. https://doi.org/10.1016/j.telpol.2017.11.002 Go to original source...
    29. Khan, I., Rehman, M. Z., Khan, I. (2025). Optimizing natural resource management and global supply chains through digital innovation. Technological Forecasting and Social Change, 217, 124187. https://doi.org/10.1016/j.techfore.2025.124187 Go to original source...
    30. Khan, M., Khan, I. (2024). Achieving environmental sustainability through technological innovation, good governance and financial development: perspectives from low income countries. Sustainable Futures, 8, 100392. https://doi.org/10.1016/j.sftr.2024.100392 Go to original source...
    31. Khan, M. N. (2024). Assessment of impact of country business ranking on economic development: An empirical analysis. Global Business & Finance Review. 29, 30-41. Go to original source...
    32. Khanal, S., Bhattarai, S. B. S., Adhikari, U., Sharma, D., Pandey, M. (2021). Disparities between developed and emerging economies in digital divide and ICT gap to bring agricultural sustainability. Fundamental and Applied Agriculture, 6, 309-322. Go to original source...
    33. Košíková, M., Vašaničová, P. (2025). Exploring the Link Between Digital Readiness and Sustainable Development: A Cluster Analysis of EU Countries. Sustainability, 17, 5080. https://doi.org/10.3390/su17115080 Go to original source...
    34. Li, G., Luo, J., Liu, S. (2024a). Performance evaluation of economic relocation effect for environmental non-governmental organizations: Evidence from China. Economics, 18, 20220080. https://doi.org/10.1515/econ-2022-0080 Go to original source...
    35. Li, L., Su, F., Zhang, W., Mao, J. Y. (2018). Digital transformation by SME entrepreneurs: A capability perspective. Information Systems Journal, 28, 1129-1157. https://doi.org/10.1111/isj.12153 Go to original source...
    36. Li, X., Feng, G.-F., Shum, W. Y., Chui, K. H. (2024b). The impacts of digital transformation on labor income share: Evidence from China. Emerging Markets Finance and Trade, 60, 1265-1280. https://doi.org/10.1080/1540496X.2023.2273996 Go to original source...
    37. Magoutas, A. I., Chaideftou, M., Skandali, D., Chountalas, P. T. (2024). Digital progression and economic growth: Analyzing the impact of ICT advancements on the GDP of European Union countries. Economies, 12, 63. https://doi.org/10.3390/economies12030063 Go to original source...
    38. Magwedere, M. R., Marozva, G. (2025). Inequality and informal economy: the moderating role of financial technology. Economics: Innovative and Economics Research Journal, 13, 197-211. Go to original source...
    39. Matyushok, V., Vera Krasavina, V., Berezin, A., Sendra Garcia, J. (2021). The global economy in technological transformation conditions: A review of modern trends. Economic Research-Ekonomska Istraživanja. 34, 1471-1497. https://doi.org/10.1080/1331677X.2020.1844030 Go to original source...
    40. Medhioub, N., Boujelbene, Y. (2024). Bridging the digital divide: Innovation, economic growth and income inequality. Innovation and Development, 1-26. https://doi.org/10.1080/2157930X.2024.2401236 Go to original source...
    41. Moeini Gharagozloo, M. M., Askarzadeh, F., Moeini Gharagozloo, A. (2022). More power for international entrepreneurs: the effect of digital readiness of economies on channeling national R&D resources to entrepreneurship. Journal of International Entrepreneurship, 20, 474-502. https://doi.org/10.1007/s10843-021-00296-6 Go to original source...
    42. Murthy, K. B., Kalsie, A., Shankar, R. (2021). Digital economy in a global perspective: Is there a digital divide? Transnational Corporations Review, 13, 1-15. https://doi.org/10.1080/19186444.2020.1871257 Go to original source...
    43. Musa, I., Njoku, N. A., Magaji, S. (2025). Analyzing the Economic Effects of Digital Infrastructure and Internet Accessibility on Nigeria's Sustainable Development. Journal of Economics, Innovative Management and Entrepreneurship, 3. Go to original source...
    44. Nosike, C. J. (2024). Digitalization in developing countries: Opportunities and challenges. Nigerian Journal of Arts and Humanities, 4(1).
    45. Nosratabadi, S., Atobishi, T., Hegedűs, S. (2023). Social sustainability of digital transformation: Empirical evidence from EU-27 countries. Administrative Sciences, 13, 126. https://doi.org/10.3390/admsci13050126. Go to original source...
    46. Ochillo, F. (2022). The economic consequences and generational impact of the digital divide. Cambridge: Belfer Center for Science and International Affairs.
    47. Otieno, P. O., Busili, P. A. (2024). A Research on Labor, Finance, Technology, and Sustainable Growth. International Journal of Innovative Science and Research Technology, 9, 3570-3597.
    48. Paddu, A. H., Fattah, S., Anwar, A. I. (2025). Income Inequality Challenges Economic Stability and Social Cohesion. International Journal of Environmental Sciences, 11, 387-394. Go to original source...
    49. Rao, N. D., Pachauri, S. (2017). Energy access and living standards: some observations on recent trends. Environmental Research Letters, 12, 025011. https://doi.org/10.1088/1748-9326/aa5b0d Go to original source...
    50. Rydzewski, P. (2025). Digital inequality and sustainable development. Problemy Ekorozwoju, 20, 96-108. https://doi.org/10.35784/preko.6691 Go to original source...
    51. Sanders, C. K., Scanlon, E. (2021). The digital divide is a human rights issue: Advancing social inclusion through social work advocacy. Journal of Human Rights and Social Work, 6, 130-143. https://doi.org/10.1007/s41134-020-00147-9 Go to original source...
    52. Sarah, C., Jane, B., Rónán, O. B., Ben, R. (2004). Quality assurance for digital learning object repositories: issues for the metadata creation process. Research in Learning Technology, 12, 5-20. https://doi.org/10.1080/0968776042000211494 Go to original source...
    53. Shenglin, B., Bosc, R., Jiao, J., Li, W., Simonelli, F., Zhang, R. (2017). Digital infrastructure: overcoming the Digital divide in China and the European Union. CEPS Papers 13194.
    54. Sindakis, S., Showkat, G. (2024). The digital revolution in India: bridging the gap in rural technology adoption. Journal of Innovation and Entrepreneurship, 13, 29. https://doi.org/10.1186/s13731-024-00380-w Go to original source...
    55. Suhrab, M., Chen, P., Ullah, A. (2024). Digital financial inclusion and income inequality nexus: can technology innovation and infrastructure development help in achieving sustainable development goals? Technology in Society, 76, 102411. Go to original source...
    56. Sun, L., Abraham, S. (2021). Estimating dynamic treatment effects in event studies with heterogeneous treatment effects. Journal of Econometrics, 225, 175-199. https://doi.org/10.1016/j.jeconom.2020.09.006 Go to original source...
    57. Wang, F., Shen, S. (2024). Does the digital economy development improve or exacerbate income inequality? International evidence. Managerial and Decision Economics, 45, 4012-4038. https://doi.org/10.1002/mde.4231 Go to original source...
    58. Wu, B., Ren, K., Fu, Y., He, D., Pan, M. (2024). Institutional investor ESG activism and green supply chain management performance: Exploring contingent roles of technological interdependences in different digital intelligence contexts. Technological Forecasting and Social Change, 209, 123789. https://doi.org/10.1016/j.techfore.2024.123789 Go to original source...
    59. Wu, T., Simonetto, D. A., Halamka, J. D., Shah, V. H. (2022). The digital transformation of hepatology: The patient is logged in. Hepatology, 75, 724-739. https://doi.org/10.1002/hep.32329 Go to original source...
    60. Xi, M., Chen, Y., Jiang, K. (2025). All Roads Lead to Rome? A Contingent Configurational Perspective of HRM Systems and Organizational Effectiveness. Personnel Psychology. https://doi.org/10.1111/peps.12681 Go to original source...
    61. Xiao, A., Xu, Z., Skare, M., Qin, Y., Wang, X. (2024). Bridging the digital divide: the impact of technological innovation on income inequality and human interactions. Humanities and Social Sciences Communications, 11, 1-18. https://doi.org/10.1057/s41599-024-03307-8 Go to original source...
    62. Xu, C., Zhu, S., Yang, B., Miao, B., Duan, Y. (2023). A review of policy framework research on promoting sustainable transformation of digital innovation. Sustainability, 15, 7169. https://doi.org/10.3390/su15097169 Go to original source...
    63. Yang, X., Chen, J., Li, D., Li, R. (2024). Functional-coefficient quantile regression for panel data with latent group structure. Journal of Business & Economic Statistics, 42, 1026-1040. https://doi.org/10.1080/07350015.2023.2277172 Go to original source...
    64. Yongsheng, X., Yingquan, L. (2025). Global sustainable supply chain governance, effectiveness of social responsibility, and performance in emergent markets: An exploratory multiple case study. Revista de Administração de Empresas, 65, e2024-0587. https://doi.org/10.1590/S0034-759020250602 Go to original source...
    65. Yusuf, S. (2021). Digital technology and inequality: The impact on Arab countries. Economic Research Forum.
    66. Zhang, J., Li, J., Yan, Y., Xie, Z. (2025). Concentration in cross-border research collaborations and MNCs' knowledge creation in a host country. Strategic Management Journal. https://doi.org/10.1002/smj.70025 Go to original source...
    67. Zhang, Z., Xu, H., Qiao, Z. (2024). Has the digital economy enhanced the income distribution effect among industries? Evidence from China. Sustainability, 16, 8969. https://doi.org/10.3390/su16208969 Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return