Working Paper: CEPR ID: DP2399
Authors: Larshendrik Röller; Leonard Waverman
Abstract: This paper investigates how telecommunications infrastructure affects economic growth. This issue is important and has received considerable attention in the popular press concerning the creation of the 'information superhighway' and its potential impacts on the economy. We use evidence from 21 OECD countries over a twenty-year period to examine the impacts that telecommunications developments may have had. We estimate a structural model, which endogenizes telecommunication investment by specifying a micro-model of supply and demand for telecommunication investments. The micro-model is then jointly estimated with the macro-growth equation. After controlling for country-specific fixed effects, we find evidence of a significant positive causal link, especially when a critical mass of telecommunications infrastructure is present. Interestingly, the critical mass appears to be at a level of telecommunications infrastructure that is near universal service.
Keywords: economic growth; telecommunications; economic development
JEL Codes: L96; O47; O57
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Telecommunications infrastructure (L96) | Economic growth (O49) |
| Critical mass of telecommunications infrastructure (L96) | Economic growth (O49) |
| Telecommunications infrastructure investments (L96) | Economic growth (O00) |
| Telecommunications infrastructure below critical level (L96) | Economic growth (O49) |
| Presence of network externalities (D85) | Economic growth (O00) |
| Telecommunications infrastructure investments contribute to divergence in economic performance (H54) | Economic growth (O00) |