Measuring the Economic Impact of Digital Transformation: A Provincial-Level Analysis in Northern Vietnam

Abstract

This study investigates the causal impact of digital transformation on regional economic growth across 25 provinces in Northern Vietnam during 2015-2023. Despite Vietnam's ambitious National Digital Transformation Program targeting 30% digital economy contribution to GDP by 2030, rigorous empirical evidence on the digital-growth nexus at subnational level remains conspicuously absent. We construct a comprehensive Digital Transformation Index (DTI) encompassing four dimensions - digital infrastructure, digital government, digital business ecosystems, and digital human capital - and employ panel data methods including Fixed Effects, Random Effects, and System Generalized Method of Moments estimations to address endogeneity and dynamic panel bias. Our baseline results demonstrate that a one-unit increase in DTI generates 0.43-0.58 percentage points increase in GRDP growth rates. Disaggregated analysis reveals digital infrastructure and digital business as the most potent growth drivers, while effects exhibit substantial heterogeneity between the advanced Red River Delta and less-developed Northern Mountainous regions. These findings advance the literature by providing first quantitative evidence on multidimensional digital transformation impacts in an emerging economy context, with direct policy implications for targeted digital investment allocation, cross-regional coordination mechanisms, and inclusive development strategies that mitigate digital divides.