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ZEF Discussion Papers on Devlopment Policy 7
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Bog'liq zef dp07ZEF Discussion Papers on Devlopment Policy 7
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A natural corollary of the reduction in information and negotiation costs is that the
diffusion of ICTs may promote the efficacy of organizations by enhancing mutually beneficial
exchanges. Improved information flows and reduced uncertainty may allow firms to access
national and international markets more readily and permit them to open up new product and
factor markets. A more detailed discussion of the effect of ICTs on the spread of markets is
provided in the following section.
Before proceeding, two additional points need to be made. First, as characterized in the
previous section, the effects of these technologies are pervasive. Their role in reducing the cost
of information flows and aiding faster and better economic and administrative decision-making
is not limited to a particular type of organization. Increased use of these technologies can
improve the performance and productivity both of private firms and of public-sector
organizations. Talero and Gaudette (1995), argue that public administration is highly
information-intensive and that the use of modern IT has the potential to increase the efficiency,
transparency and accountability of governments.
Second, the effects of these technologies in reducing uncertainty and leading to quicker
and better decision-making should manifest themselves in a variety of ways. At a macro level,
the use of ICTs may be expected to enhance the productivity of the various factors of production
and should be associated with increases in aggregate output. At a micro level, the use of these
technologies should be associated with increases in firm and factor productivity.
3.2 The Functioning and emergence of markets
By lowering the costs of communicating and transmitting information, i.e., by reducing
transaction costs, the spread of ICTs may enhance the efficiency and encourage the spread of
factor and product markets in developing countries. The potential effects of ICTs on the
functioning and spreading of markets may be considered by borrowing a framework used by
Norton (1992).
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Work on a more complete framework that may be used to estimate transaction costs and to examine whether
these costs are the source of reduced market participation is currently underway. This framework will also allow us
to examine whether diffusion of ICTs is related to a reduction in transaction costs.
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