Telecommunications infrastructure and economic growth: a cross-country analysis

Abstract

The potential role that may be played by information and communication technologies in promoting economic growth, especially in low-income countries is currently attracting considerable attention. Despite this interest, empirical work that measures the impact of such technologies on growth is limited. To measure the growth generating potential of these technologies, in this paper we use data from 113 countries over a 20-year period to examine the impact of terrestrial telecommunications infrastructure, by far the most widely prevalent communication technology in developing countries, on economic output. Our empirical strategy allows for the endogeneity between telecommunications infrastructure and income and follows the approach developed by Roller and Waverman (2001). Our estimates display a positive casual link between telecommunications infrastructure and GDP. The effect appears to be non-linear and is particularly pronounced for countries with a telecom penetration rate of between 5-15 percent.