The Effects of Digital Literacy on Wages in Europe and Central Asia

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.Policy Research Working Paper 11308 Digital skills are becoming increasingly more important
in the labor market as demand for them is increasing in all sectors. This paper explores the determinants of digital skill acquisition and estimates the impact of digital skills on wages in developing countries by using the latest round of the Life in Transition Survey from 30 countries in the Europe and Central Asia region. The results show that acquisition of digital skills is correlated with individual characteristics including age, education, and gendernbut also with household characteristics such as household income, place of residence, and parents’ educational attain ment. These disparities translate directly into labor market outcomes: individuals with advanced digital skills earn, on average, 18.9 percent higher wages than those without such skills, with substantial heterogeneity within and between regions. The wage premium for high digital skills is higher in Central Asia, the South Caucasus, Eastern Europe, and Central Europe. Moreover, the results show that larger firms offer significantly higher premiums for digital skills.