Digital Transformation and Economic Productivity in Developing Economies: A Review of Mechanisms, Evidence and Policy Implications

Digital transformation—the diffusion of information and communication technologies (ICT), broadband infrastructure, digital platforms and, increasingly, artificial intelligence—is widely regarded as a central driver of economic growth in the twenty-first century. Yet its effect on productivity in developing economies remains contested. This paper reviews the theoretical mechanisms and empirical evidence linking digital transformation to productivity, with particular attention to low- and middle-income countries and to Uzbekistan and Central Asia. Drawing on growth theory, the literature on general-purpose technologies and recent cross-country evidence, the review identifies four principal channels through which digitalisation raises productivity: reduced transaction and information costs, improved allocation of resources, expanded market access, and accelerated diffusion of knowledge. It also examines why these gains are often delayed or unevenly distributed—a pattern echoing the historical ‘productivity paradox’. The review concludes that the productivity returns to digital transformation are conditional on complementary investments in human capital, institutional quality, broadband infrastructure and an enabling regulatory environment. For developing economies, the policy priority is therefore not merely the adoption of technology but the building of the complementary capabilities that allow it to translate into measurable productivity growth.