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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
15
At the outset, it is important to note that this single-equation approach entails a few
econometric problems. First, estimating one equation with few variables such as capital and
labor is far too parsimonious to provide a convincing estimate of the ICT-growth link. There are
a myriad of factors that may influence growth, and ignoring them may lead to an overestimate of
the effect of ICTs. Second, a single-equation approach fails to account for the potentially
endogenous nature of ICTs and growth, i.e., the greater availability of ICTs may lead to higher
GDP, but at the same time, higher GDP may lead to greater demand for ICTs. This endogeneity
may lead to an overestimate of the effect of ICTs on growth.
4.1.1 Telecommunications and growth
Early work on the effects of ICTs on growth focused on the telecom-growth link and
ignored the econometric issues outlined above.
22
However, by demonstrating the strong
correlation between telephone density and GDP, these papers drew attention to the potential role
of telecommunications and set the stage for more detailed and elaborate analyses. For instance,
Hardy (1980) uses data from 15 developed and 45 developing countries for the years 1960
through 1973 and regresses GDP per capita on lagged GDP per capita, lagged telephones per
capita, and the number of radios. While the results of the paper support the idea that the greater
availability of telephones has a positive effect on GDP, the results must be interpreted cautiously
as the paper ignores the two econometric issues outlined above.
A more recent example of this genre is an analysis conducted by Norton (1992). Using
data from a sample of 47 countries for the post-WW II period until 1977, the paper investigates
the effects of telephone infrastructure on growth rates and also tries to identify the channels
through which the availability of this infrastructure leads to growth (i.e. the effect of telephone
infrastructure on the mean investment ratio and consequently on income growth). The empirical
framework replicates Kormendi and Meguire (1985), but includes an additional variable to
capture the telecommunications infrastructure and is specified as,
i
I
I
i
I
i
I
I
i
i
Y
Y
i
Y
i
Y
Y
i
avg
d
d
X
I
avg
d
d
X
Y
ε
δ
γ
β
α
ε
δ
γ
β
α
+
+
+
′
+
=
+
+
+
′
+
=
_
57
_
_
57
_
(6)
where for country
i,
Y
is the mean annual rate of growth in gross domestic product for the
sample years,
I
is the mean investment ratio,
X
is a vector of variables that influence growth
(including initial-year per capita income, mean annual population growth, mean money-supply
growth, mean growth in the ratio of government spending to output, mean growth in exports as a
proportion of output, and mean growth in the rate of inflation),
d_57
is the telephone density
(number of telephones per 100 inhabitants) in 1957 and
d_avg
is the mean telephone density
over the time period of the sample. Based on the argument that the existence of a developed
communications infrastructure reduces transaction costs and promotes greater output, the effects
22
Early work conducted in the 1960s and 1970s is reviewed in Saunders
et al
. (1983).
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