Who Gains from Cybersecurity Preparedness ? Evidence from Sectoral Growth

Overview & Synopsis

Does cybersecurity preparedness matter for growth, and if so, where? This paper provides evidence that cybersecurity preparedness amplifies growth in digitally exposed sectors, highlighting its role as a key institutional complement to digitalization. The analysis uses an interaction design across countries and sectors on a panel of 178 countries, five sectors, and two growth intervals, exploiting differences across sectors within the same country period and over time. The estimates imply that a one standard deviation increase in cybersecurity preparedness is associated with about 1 to 2 percentage points higher annualized value added growth in sectors that are more vulnerable to cyber risk relative to less exposed sectors within the same country and period. The result is robust across alternative measures of sectoral vulnerability and a range of additional tests. Effects are slightly larger in high income countries, indicating potential differences in the effectiveness of cybersecurity systems. Overall, the results suggest that investments in digital infrastructure and digital adoption may yield larger and more resilient growth returns when accompanied by effective cybersecurity.