Digitalization and the Changing Role of Agriculture in Export Structures: Evidence from Selected ASEAN and South Asian Economies

Abstract

A sector's declining share of national exports can reflect either its own contraction or faster growth elsewhere in the export basket, and digitalization has been proposed as a driver of both patterns. This study re-examines that question for a panel of 14 ASEAN and South Asian economies (9 ASEAN, 5 South Asia; N = 172; 2010–2023), regressing the agricultural raw-material export share on a Principal Component Analysis (PCA)-based Digital Economy Index constructed from four connectivity indicators, controlling for GDP per capita, trade openness, and inflation. Model-selection tests favor a two-way fixed-effects (TWFE) specification with country and year effects. Because residual diagnostics indicate serial correlation and cross-sectional dependence, inference relies on Driscoll–Kraay (DK) standard errors. In the one-way country fixed-effects model, the Digital Economy Index is negatively and strongly associated with the agricultural raw-material export share, but this association reverses in sign and loses statistical significance once year fixed effects are added (β = 0.409, SE = 0.316, p = 0.197). This result is stable across DK lag lengths of 0 to 3. First-difference and country-specific time-trend specifications instead yield positive coefficients. The evidence therefore suggests that the strong negative association obtained without year effects is intertwined with broader temporal dynamics rather than representing a robust within-country effect of digitalization. The study finds no statistically significant evidence, in the preferred specification, that digitalization systematically reduces agriculture's relative position in national export structures, and cautions against interpreting the earlier negative association causally.