Going digital can actually shrink a region's economy in the short term, and better schools do nothing to stop the slump.
April 2, 2026
Original Paper
Digitalization and regional growth in Vietnam through a sequential mediation framework
SSRN · 6508276
The Takeaway
While moving to digital systems is usually seen as an immediate win for prosperity, this study of Vietnamese provinces found that 'adjustment costs' create a temporary negative drag on the economy. Furthermore, it revealed that general schooling fails to help provinces translate technology into productivity; without specific digital capabilities, a more educated workforce provides no shield against these losses.
From the abstract
This study examines the way digitalization influencing human capital, productivity, income, and regional economic performance in Vietnam. Drawing on human capital theory, endogenous growth theory, and the information and communication technologies framework, we develop a multi-step structural model capturing both direct and indirect relationships. Using 490 samples from a balanced panel of Vietnamese provinces from 2018 to 2024, we estimate a structural equation model complemented by fixed-effec