Data (Center) Economy: The Impact of Data Centers on Firm Performance in Developing Economies

Data centers form the backbone of the data economy, enabling cloud computing services and AI model development. This study examines how the presence of data centers affects the performance of local firms in developing countries, where IT capital is often scarce and data centers can serve as a cost-effective alternative to in-house IT infrastructure. Using firm-level data from the World Bank Enterprise Surveys, we find that domestic data center availability is positively associated with firms’ sales, profitability, and labor productivity but not costs. These results underscore the critical role of the data center economy as the foundation of the broader digital economy, particularly in developing countries.