S. M. Wagan, S. Sidra. Digital Technology's Impact on Service Sector Productivity and Modernization

https://doi.org/10.15507/2413-1407.129.033.202503.386-405
EDN: https://elibrary.ru/fmshtz
​УДК / UDC 004.9:658.64 

Abstract

Introduction. The effect of digital technology on productivity of service industry is imperative regarding economic growth of the world economy especially where service industries dominate GDP in developed economies. The paper looks at the aspect of digital transformation in relation to its impact on service productivity in 176 economies between 2009 and 2023 in terms of disparities in income levels, economies of scale perspectives, and structural modernization.

Materials and Methods. In the investigation of the association between service labor productivity and digital technology (as evaluated using the ICT Development Index), we used a cross-nation panel data and fixed-effects regression generalization. Testing of the mechanism involved economies of scale analyses of mediation as well as structural modernization. UNCTAD and the World Bank were used as sources of data regarding 176 economies, and the period was 15 years.

Results. Each unit increase in the ICT Development Index stimulated a 0.43 percent growth in the service labor productivity (p < 0.01). The 8.8 percentage productivity growth was attributed to high-income countries than the middle and low incomes nations. The improvement of productivity through economies of scale and structural modernization led to digitalization; however, it had minimal impact in the developing regions because of the mismatched infrastructure and missing integration in the developing areas.

Discussion and Conclusion. In high-income economies, digital technology has a very strong environment in increasing service productivity but in the lower-income contexts, it has less significant effects. The policy implications are that there should be specific investments in digital infrastructure, institutional preparation, and human capital provision to achieve growth on an inclusive basis. There are data availability and heterogeneity of regions. Digital inclusion strategies and the firm-level dynamics should be investigated in the future. This paper contributes to the quantitative data on unevenness in digital transformation around the globe and it guides on how policy makers can utilize it to achieve a sustainable economic growth.

Keywords: digital technology, service industry productivity, cross-national panel data, economies of scale, structural modernization, income-level heterogeneity, digital divide, policy implications

Conflict of interest. The authors declare no conflict of interest.

For citation: Wagan S.M., Sidra S. Digital Technology's Impact on Service Sector Productivity and Modernization. Russian Journal of Regional Studies. 2025;33(3):386–405. https://doi.org/10.15507/2413-1407.129.033.202503.386-405

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About the authors:

Shah M. Wagan, PhD, Researcher, Business School, Sichuan University (No. 24 South Section One of the First Ring Road, Wuhou District, Chengdu City, China), ORCID: https://orcid.org/0009-0003-0449-2655, Scopus ID: 59194743800, shah.mehmood04@outlook.com

Sidra Sidra, Postgraduate Student, Business School, Sichuan University (No. 24 South Section One of the First Ring Road, Wuhou District, Chengdu City, China), ORCID: https://orcid.org/0009-0003-1689-3296, Researcher ID: MGB-6191-2025, Scopus ID: 59406847100, sidra_scu@outlook.com

Contribution of the authors:

S. M. Wagan – Funding Acquisition; Project Administration; Investigation; Writing – Original Draft Preparation.

S. Sidra – Investigation; Writing – Review and Editing.

Availability of data and materials. The datasets used and/or analyzed during the current study are available from the authors on reasonable request.

The authors have read and approved the final manuscript.

Submitted 13.12.2024; revised 16.06.2025; accepted 23.06.2025.