Privatization, ICTs and Economic Development: Elucidating Multivariate Data Analyses

Abstract

We investigated the effects of various factors related to telecommunications that affect economic activity in 205 countries. Specifically, we examined the effects of demographic characteristics, privatization of the telecommunications industry, investment in telecommunications, and infrastructure for information and communication technologies (ICT).

From the many analyses, several trends have become evident. Telecommunications infrastructure is highly related to economic outcomes, with those countries with the highest levels of ICT exhibiting the highest levels of economic outcomes. Privatization has had ambiguous effects; we would need further study with more complete data before we could make any conclusive statements. The main demographic variables that have to do with economic activity are geographic, though urbanization seems to have a slight impact.

While this study has confirmed the relationship between ICTs and economic outcomes, we must caution that none of these analyses prove causality. In other words, we have not proven that ICTs cause favorable economic outcomes; it could very well be the other way around. We would need further studies that investigate the values of different data in time to make any causal claims.

Nonetheless, establishing the existence of a strong relationship is a valuable first step for policy makers. Understanding that ICTs are related to economic outcomes should suggest that national policies should favor the increase of ICTs in order to spur associated economic activity.

Keywords: privatization, information and communication technologies, economic development, ICT, telecommunictions, telecommunications investment, ICT infrastructure, economic activity