Telecommunications Infrastructure and Economic Development: A Simultaneous Approach

TLDR

In this paper we investigate how telecommunications infrastructure affects economic growth. Using data from 21 OECD countries over 20 years, the authors jointly estimate a micromodel of telecommunication investment within a macro production function. The study finds a significant positive causal link between telecommunications infrastructure and economic growth, particularly when a critical mass—approaching universal service—is achieved. JEL codes: O57, O47, L69.

Abstract

In this paper we investigate how telecommunications infrastructure affects economic growth. We use evidence from 21 OECD countries over a 20-year period to examine the impacts that telecommunications developments may have had. We jointly estimate a micromodel for telecommunication investment with a macro production function. 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. (JEL O57, O47, L69)