Abstract
This paper examines the impact of digital transformation on the Egyptian labour market over the period 2002–2024. It reviews the relevant theoretical and empirical literature on the relationship between digital transformation, human capital, investment, and labour-market outcomes. The study employs the Autoregressive Distributed Lag (ARDL) model to estimate the effect of digital transformation on unemployment in Egypt. The results indicate that digital transformation is significantly associated with lower unemployment. In the long run, fixed broadband penetration (a proxy for digital transformation) is negatively and statistically significantly associated with unemployment, suggesting that stronger digital connectivity contributes to improved labour-market outcomes. The findings also show that the unemployment-reducing effect of digital connectivity strengthens as tertiary education increases, highlighting the complementary role of human capital in leveraging digital infrastructure to reduce the unemployment rate. Gross fixed capital formation also has a negative, significant long-run effect on unemployment, indicating that physical capital accumulation supports job creation. Overall, the evidence suggests that digital infrastructure alone is not sufficient to maximise the labour-market benefits of digital transformation; rather, these benefits depend critically on the interaction between digital connectivity and human capital.
JEL classifications: J01, C22, O33, E24, I25.