Digital Economy and Growth in 58 Economies: The Moderating Role of Financial Development and Human-Capital Investment

The growth payoff of the digital economy may depend on complementary national capacities. This study quantifies the growth effect of deepening the digital economy. It tests how financial development and human-capital investment moderate it in 58 OECD, accession-candidate, key-partner, and EU candidate economies. A composite Digital Economy Index (DEI) aggregates digital-trade participation, infrastructure, and using the Z-score method. The index was computed through 2023, while the estimation covers 2014–2022 owing to the human-capital moderator’s reporting lag. The dependent variable is the natural logarithm of real GDP per capita (constant 2015 US$). Financial development is measured by domestic credit to the private sector (% of GDP) and human-capital investment by government education expenditure (% of GDP). In two-way fixed-effects models, the DEI coefficient is positive but imprecise and is significantly positive at below-average levels of credit and education spending. Within-country digital deepening is robustly positive under country fixed effects. The dividend is smaller where private credit is abundant (“too much finance”). We find no significant interaction with a tertiary-enrolment stock proxy, indicating that moderation operates at the fiscal input margin rather than through the measured skill-stock proxy. The results are robust to instrumentation, aggregation, fixed-effects structure, and sample windows. They are not robust to country-specific linear trends, because these trends absorb most within-country variation in the index during this panel period, rather than necessarily overturning the underlying finding.