Telecommunications Adoption and Economic Growth in Developing Countries: Do Levels of Development Matter?

Abstract:     
This paper assesses the growth impact of telecommunications infrastructure investment in developing countries by subjecting country specific data on mainline tele-density and per capita growth to Granger causality test within a panel cointegration framework. The results suggest that growth effects vary widely across country groupings reflecting different levels of development. Mainline tele-density and per capita growth strongly reinforces each other for countries that are relatively less developed. In contrast, there is, at best, a weak evidence of a bi-directional causal link between the two variables for countries that are relatively more industrialized. These differences in mainline tele-density and per capita growth relationship suggest that investment in telecommunications infrastructure, with its potential to generate high growth return, may serve as the critical engine for driving the development process forward in the less developed countries.

Number of Pages in PDF File: 15

Keywords: Developing Countries, Telecommunications Infrastructure, Spillover Network Effects, development gap, growth convergence, Per Capita Growth, Mainline Tele-density, Cointegration, Causality

JEL Classification: O47, O57, L96, H54

working papers series