Assessing the Digital Transformation Index and Its Influence on GRDP Growth in Northern Vietnam

Abstract

Digital transformation has emerged as a critical driver of regional economic growth in developing economies, yet empirical evidence on its quantifiable impact remains limited, particularly at the subnational level. This study constructs a comprehensive Digital Transformation Index (DTI) and examines its influence on Gross Regional Domestic Product (GRDP) growth across 25 provinces in Northern Vietnam during 2015-2023. Utilizing a composite index methodology encompassing infrastructure, human capital, e-government, and digital economy dimensions, we employ dynamic panel data techniques including System Generalized Method of Moments (GMM) to address endogeneity concerns. Our findings reveal that a one-unit increase in DTI corresponds to a 0.287% increase in GRDP growth, with pronounced heterogeneity across coastal versus inland regions. E-government development and digital infrastructure emerge as the most influential components, while human capital digitalization exhibits diminishing returns beyond certain thresholds. The study contributes to the literature by providing the first province-level DTI for Vietnam and demonstrating nonlinear relationships between digital transformation components and economic outcomes. Policy implications emphasize targeted investments in digital infrastructure for lagging regions and integrated digital ecosystem development rather than fragmented initiatives.