Do Productive Uses of ICT Connect to Income Benefits?

CPRsouth8/CPRafrica2013 conference

2 Pages Posted: 30 Sep 2013

Date Written: September 5, 2013

Abstract

Telecommunications sector has contributed significantly to the growth of the economy. The study by Madden and Savage (1998), Nadiri and Nandi (1999), Roller and Waverman (2001), Dutta (2001), Lam and Shiu (2010), and Chakraborty and Nandi (2011) have supported this hypothesis. In Indonesia, while the Gross Domestic Product (GDP) has recorded the growth rate around 5-6% during the periods of 2004-2009; telecommunications sector has remarkably achieved 24%-30% of growth rate during the last five years, nearly five times than those of other sectors thanks to among many other factors, a massive growth of the mobile telephony. As augmented by Dutta (2001); the growing development of telecommunications sector should also be able to lead to a better socio-economics and well-beings condition. Nevertheless, the question whether the sector has been really supporting poverty alleviation and increasing welfare at the household level in Indonesia, for instance in terms of an additional income is still undisclosed.

To fill the gap, this paper aims at investigating whether the mobile phone access and the uses on productive features/content/services have brought many benefits to the households in terms of an additional income based on the BOP survey conducted by LIRNEAsia and the Institute for Economic and Social Research, University of Indonesia (LPEM FEUI) in 2011. The respondents were surveyed representing 35 urban and 25 rural areas in Java Island. The samples were selected based on the probability proportional to size (PPS)-systematic, whereas the threshold of expenditure is $1.25 per day was set based on the poverty line definition from the World Bank. To obtain the aims, this study employs the treatment effect model on the basis of propensity score matching (PSM). The method is applied by matching the characteristics of mobile phone users similar to the non-users using rich set of control variables or covariates (e.g. urban/rural, household size, occupation, and education). This study found that the respondents with the access to mobile phone have a higher likelihood for earning a 27 USD household income more than those of the unconnected ones. The study also found the productive uses of the device (when the users access to at least one of the following functionalities; information services, banking, government information, health and the payment system) contribute a 39 USD household income more than those who never accessed these services. In addition, the impact of the access is more visible in the urban area wherein economic activities are more available. As the comparison, the study also replicates the investigation on the access to the banking system denoted by the ownership of bank accounts where the study found a visible and greater impact to the household income. Therefore, the future policies to eradicate poverty should be directed towards enabling the BOP users for the access to the ICT devices with a greater link to the payment system and to substitute the functionality of baking services, especially in the area where the banking system has not developed yet.

Suggested Citation

Rohman, Ibrahim Kholilul, Do Productive Uses of ICT Connect to Income Benefits? (September 5, 2013). CPRsouth8/CPRafrica2013 conference. Available at SSRN: https://ssrn.com/abstract=2331916

Ibrahim Kholilul Rohman (Contact Author)

Chalmers University of Technology ( email )

Vera Sandbergs Alle 8
Gothenburg, SE-41296
Sweden

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