Understanding the Dynamic of Digital Economy in the Context of Digital Literacy of Thai Households

Digital economy has led to new business opportunities and growth potential especially for developing countries such as Thailand. However, one crucial factor that could create challenges is the readiness of households in adapting to the digital environment. This research proposes that digital literacy of households is the key indicator that helps policy makers to understand the digital divide situation. Digital literacy should be measured by 4 sub-dimensions, namely, 1) the access to digital technologies 2) the level of digital skills 3) the level of digital knowledge and 4) the digital information awareness. After using the principal component analysis (PCA) to develop the scoring system of digital literacy and using the cluster analysis to classify the sample into 3 levels of digital literacy, it is found that households in the illiterate group are mostly unemployed or work in the labor-intensive sector. When looking at how they use financial services, they appear to significantly use fewer banking services and have lower preference on the personalization of services than the digital fluency group. This evidence suggests that populations in the digital illiterate group may have already suffered from the digital divide which could intensify the problem of wealth inequality in the digital era. Consequently, policies that guarantee all households to have certain levels of digital literacy are needed.