The heterogeneity impacts of digital transformation, human capital, and trade openness on income and labour productivity in Vietnam

Abstract

Improving labor productivity and per capita income are top priorities in Vietnam’s economic policy for the next decade. This study aims to explore the heterogeneous impacts of digital transformation, human capital, and trade openness on income and labor productivity in the Vietnamese economy from 1990 to 2018. The empirical results, obtained through the quantile regression method and Bayesian inference, unequivocally demonstrate that digital transformation and trade openness significantly promote labor productivity and income improvement. Moreover, the increase in human capital unequivocally enhances income and supports the rise in labor productivity. The Granger causality test reveals a uni-directional causality running from digital transformation to income and no causal relationship between digital transformation and labor productivity. Based on these findings, we recommend that the government and businesses should invest in and develop the Internet of Things (IoT), telecommunications, and network security infrastructure. These fundamental elements affect how well and successfully the digital transformation goes. Additionally, raising the caliber of the workforce ought to be taken into account.