Are digital advances and inclusive growth compatible goals? Implications for trade policy in developing countries

Recent years have seen policymakers give increasing attention to two significant, widespread phenomena: rising inequality (the result of uneven access to productive employment) and the quickening pace of the Fourth Industrial Revolution (4IR) or “digital era”. This chapter explores the concept of inequality and why it is important to promote more inclusive growth, especially in developing countries. It also offers insights into how digital advances can serve to accelerate inclusive growth, provided countries have well-informed policies, regulations and institutions to drive the necessary changes. It is evident from a cross-section of the literature and the initial results from a study on the effects of digital advances on inclusive growth in Africa that digitalization and inclusive growth are ideologically compatible. The areas requiring special attention by policymakers in developing countries include: (i) the problem of data inadequacy; (ii) uneven and costly digital connectivity; and (iii) education systems that are not preparing entrepreneurs for in-demand jobs or for the workplace of the future. Two of the prerequisites for leveraging digital technologies in order to drive more inclusive growth are an effective regulatory framework and a commercial environment that is both trade- and investment-friendly.