The Upside of Digital for the Middle East and North Africa by Ana Paula Cusolito Clément Gévaudan Daniel Lederman & Christina A. Wood

Author:Ana Paula Cusolito, Clément Gévaudan, Daniel Lederman & Christina A. Wood
Language: eng
Format: epub

FIGURE 5.8 Decline in Unemployment due to the Diffusion of Digital Payments in the Middle East and North Africa and in Sub-Saharan Africa, 2017–33

Sources: Calculations based on estimates by Lederman and Zouaidi 2020 and unemployment data from the International Labour Organization.

Note: The graph shows how long-run unemployment rates would fall for Sub-Saharan Africa and the Middle East and North Africa, on average (weighted by population), as digital payments (defined as using the internet to make a payment) approach 100% of the adult population. Unemployment rates are unlikely to become zero. As they decline, it is likely that labor markets will adjust through other margins, including reductions in informality and increases in real wages. The estimations by Lederman and Zouaidi (2020) control for cyclical factors as well as informality.

Thus far, the evidence presented comes from international comparisons. However, recent research on the relationship between the advent of the internet and labor market outcomes is based on micro panel data from labor force surveys. El-Mallakh (2020) finds that an internet job search in the Arab Republic of Egypt increases the chance of employment by 10 percentage points for an unemployed individual. However, this effect does not hold when considering only women or only rural job seekers. Labor force participation for women also is found to increase in Egypt with the use of job search platforms. In addition, Viollaz and Winkler (2020) find that the advent of internet connections via cell towers improved female labor force participation in Jordan. More specifically, a 1 percentage point increase in internet access led to an increase in female labor force participation of 0.8 percentage point, possibly owing to changing social norms.

However, cross-country evidence is consistent with the idea that the advent of the digital economy is associated with an increase in female labor force participation (FLFP). Lederman and Zouaidi (2020) estimate regression models linking FLFP across countries with the incidence of digital payments. The partial correlation is approximately +0.38, after controlling for women’s education, GDP per capita as a proxy for wage levels, and inflation as a control for the business cycle (but the latter is not significant). Figure 5.9 depicts these results. Similar estimates for male labor force participation are not statistically significant, implying that the digital economy might have a pro-female bias when it comes to labor force participation. This finding is consistent with the findings for Jordan reported by Viollaz and Winkler (2020).

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