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Journal of risk and financial management

Despite the fact that a comprehensive analysis of digitalization processes in the EU member states has been carried out, the impact of a country’s digitalization level on the risks of poverty and social exclusion requires further investigation. The purpose of the paper is to verify a hypothesis that a higher level of national digitalization provides positive trends in reducing the risks of poverty and social exclusion for the population. The Digital Economy and Society Index (DESI) was used to evaluate the digitalization levels of the EU countries. The indicator “People at risk of poverty or social exclusion” (AROPE) was applied to estimate the poverty level. As the main research methods, the authors used a comparative and correlation analysis with respect to the above-mentioned indicators, as well as the Monte Carlo method in order to evaluate the probability of a change in the indicator “population at risk of poverty or social exclusion” in 2021. The EU countries with higher digitalization levels have a lower percentage of the population at risk of poverty and social exclusion. However, a higher digitalization level of the EU member states does not provide an accelerated risk reduction of poverty and social exclusion. Statistical calculations with respect to the entire population of these countries mainly indicate reverse processes. At the same time, a further reduction of poverty and social exclusion level is less probable in the countries with a higher level of digitalization. For relatively poor segments of the population (the 1st and 2nd quintiles by income) in the EU member states, the level of digitalization does not play a significant role. For relatively wealthy segments of the population (the 3rd and 4th quintiles by income) the authors noticed a pattern: the higher the level of digitalization is, the lower the risk of poverty and social exclusion becomes. A pairwise comparison of countries with initially similar AROPE values showed that in most cases (3 out of 5), the countries with higher levels of digitalization showed a more significant reduction in poverty and social exclusion. However, the probability of further positive changes in this area is higher for the countries with a lower level of digitalization.

Digitalization of the EU Economies and People at Risk of Poverty or Social Exclusion