Sustainable development outcomes of tech-based industrialization in emerging markets

Abstract

Industrialization is vital for economic growth, producing goods using technology, skilled labour, and efficient processes, driving innovation and employment. This study scrutinizes government spending and financial inclusion on the relationship between tech-intensive manufacturing value added and sustainable development in emerging and developing countries. We define technology intensity by the proportion of Medium-High Technology (MHT) manufacturing within total Manufacturing Value Added (MVA), as well as the proportion of low-tech manufacturing in total MVA. The investigation explores the connection within a group of 92 developing and emerging economies spanning from 1990 to 2021. We employed the Fixed effect (FE) and Generalized Method of Moments (GMM) strategy approaches to ensure robust empirical insights. We observed that sustainable development is positively influenced by the MHT manufacturing industries, whereas LT industries exert a detrimental impact on sustainable development. Moreover, government spending and robust financial institutions have the potential to mitigate the impact of MHT and LT manufacturing on sustainable development. These findings remain consistent after accounting for income bracket. The study recommends policymakers in developing economies increase government expenditures and establish policies that promote financial infrastructures, boosting financial literacy and inclusion, as manufacturing industries’ channels toward attaining sustainable development.