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The Role of ICT in Economic Development – A Partial Survey
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Second, it has been argued that one of the reasons for the persistence of inefficient
institutional arrangements is the lack of knowledge about other, more efficient arrangements
(Ruttan, 1984; Krueger, 1988). On a similar note, in his research on Africa, Bauer (1984)
emphasizes the role of the individual trader in bringing in new technology and knowledge of new
institutional arrangements and, as a result, in encouraging people to question existing habits. In
this context, by increasing information flows and by allowing access to a body of public
knowledge, ICTs have the potential to enlarge the set of institutional choices that may be
available to meet a particular need. This increased interaction may spark institutional change by
providing greater knowledge of alternative, more efficient arrangements.
3.4 Caveats
In the
preceding discussion, it has been argued that the spread of ICTs has the potential to
increase the efficiency of organizations, enhance the spread of markets and spark institutional
change. However, it must be noted that increased information flows and reduced transaction
costs are necessary, but not sufficient conditions for these positive outcomes. If the underlying
cause of the inefficiency of organizations or the “thinness” of markets lies not in high transaction
costs or market uncertainty but elsewhere, then clearly the spread of ICTs will have only limited
effects. Furthermore, it is by no means certain that the institutional changes that are foreseen
will actually occur. Competing interests may prevent any change, even when everyone in society
is aware that particular institutional arrangements are inefficient and dysfunctional (see Akerlof,
1976).
3.5 Negative effects
Several authors have pointed out the potential negative distributional consequences that
may be associated with the diffusion of these technologies. The two major channels through
which (the spread of) ICTs may influence income distribution are through their effect on the
distribution of information and their effect on employment.
It has been argued that access to ICTs is a function of existing income and wealth
distributions and that ICT access will accordingly be limited to a small segment of the
population. With such limited access, information gaps and information inequality may be
exacerbated and information monopolies may be perpetuated (Saunders, 1983; Morales-Gomez
and Melesse, 1998).
While this is a possibility, there is no reason to believe that access to these technologies
will be limited to a small segment of the population in every developing country. The
distributional outcome in each country/region may differ and will depend on the prevailing
policy environment and pattern of allocation of these technologies. In fact, before raising the
issue of unequal information access, one must be aware of the situation with which distributional
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