Bridging the Digital Divide or Widening the Gap? Internet Penetration and Economic Growth in 85 Developing Countries

Abstract

This study investigates the complex relationship between internet penetration and economic growth in 85 developing countries from 2001 to 2023. Utilizing annual data from the World Bank’s World Development Indicators and employing the Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) methodology, the analysis uncovers that, contrary to widespread optimism, internet penetration is significantly and negatively associated with economic growth in both the short and long run. The results challenge the prevailing assumption that digital expansion alone fosters development, highlighting the importance of complementary investments in human capital, institutional quality, and macroeconomic stability. Robust positive effects of capital formation and trade openness underscore the need for an integrated development approach. The findings suggest that policymakers must go beyond digital infrastructure and address broader economic and social enablers to realize the full potential of digital transformation in developing economies.