Digitalization and Resilience: Firm-level Evidence During the COVID-19 Pandemic

By Nordine Abidi, Mehdi El Herradi, Sahra Sakha

February 18, 2022

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Nordine Abidi, Mehdi El Herradi, and Sahra Sakha. Digitalization and Resilience: Firm-level Evidence During the COVID-19 Pandemic, (USA: International Monetary Fund, 2022) accessed December 30, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The COVID-19 pandemic has resulted in an unprecedented shock to firms with adverse consequences for existing productive capacities. At the same time, digitalization has increasingly been touted as a key pathway for mitigating economic losses from the pandemic, and we expect firms facing digital constraints to be less resilient to supply shocks. This paper uses firm-level data to investigate whether digitally-enabled firms have been able to mitigate economic losses arising from the pandemic better than digitally-constrained firms in the Middle East and Central Asia region using a difference-in-differences approach. Controlling for demand conditions, we find that digitally-enabled firms faced a lower decline in sales by about 4 percentage points during the pandemic compared to digitally-constrained firms, suggesting that digitalization acted as a hedge during the pandemic. Against this backdrop, our results suggest that policymakers need to close the digital gap and accelerate firms’ digital transformation. This will be essential for economies to bounce back from the pandemic, and build the foundations for future resilience.

Subject: COVID-19, Digitalization, Economic sectors, Financial inclusion, Financial markets, Foreign corporations, Health, Technology

Keywords: Africa, Asia and Pacific, COVID-19, Digital transformation, Digitalization, Digitalization, Digitally-constrained firm, Digitally-enabled firm, Economic resilience, Financial inclusion, Firm-level data, Firms in the Middle East, Foreign corporations, Middle East, Middle East and Central Asia, North Africa, Technology adoption

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/034
Stock No:

WPIEA2022034
ISBN:

9798400201073
ISSN:

1018-5941

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