Telecom Impact on Per-Capita GDP

Mar 24, 2006 | Inside: Exploring Frontlines

My presentation at VON was focused on availability (aka presence) and contextually-aware communications, but I did begin with a brief mention of subjects I’m passionate about and I ended with my typical closing comments about telecommunications:

1) telecom is good for mankind (more productive than other kinds of infrastructure investment),
2) the underlying technology is improving exponentially (& thus is fascinating for geeks!),
3) 6.5B people but only 2B mobiles,
This is an enormous opportunity. Have fun, while helping mankind and making money.

Apparently this struck a chord with several people who came up to me afterwards asking about how they could help the spread of telecom to developing countries and did I have references for my statements about telecom is good for mankind? The answer to the latter is yes! Even better I wrote up those references just last week in a comment to an article on Teledesity and GDP in Atanu Dey‘s blog. Here’s what I wrote:

In the case of teledensity and GDP growth, there’s actually been quite a bit of work by economists trying to tease out what is causation and what is merely correlation. Yes, it’s a difficult problem. On the other hand, there are decades of data across more than 100 countries—countries which introduced different political, legal and economic regimes at different points in time. So it turns out there is a basis on which to attempt to determine the impact of telecom and other kinds of infrastructure investments and, over the past decade or so, multiple economists have published on this subject.

A 1999 World Bank policy research working paper entitled Infrastructure’s Contribution to Aggregate Output by David Canning examines the contributions of different factors of production to aggregate output looking at 57 countries over the period 1960-1990. As I commented here last August, Canning found a large productivity benefit to investment in telecom—larger than investments in roads, electricity or even education!

Canning’s work was on pre-mobile phone data. More recently, Leonard Waverman, Meloria Meschi, Melvyn Fuss in their paper, The impact of telecoms on economic growth in developing countries, examine 38 developing countries for which full data was available for the period 1996-2003. The short summary, “There are increasing returns to the endowment of telecoms capital (as measured by the telecoms penetration rate).”

A second post in my blog last October has the full references as well as pointers to popularizations of this academic work published in The Economist (UK, subscription required), related material on the Vodafone website, and regulatory policy work by Wallenstien.

To restate the concluding words of my October post, none of this is to downplay the developing world’s need for clean water, public health initiatives and access to medical care, but if there is one area where capital investment provides out-sized returns for individuals and nations, it’s mobile telecom. And this is one area where developing nations can easily attract outside capital investment with regulatory policies that favor open access, competition and foreign investment.

This has been a featured post from Brough Turner. To visit the weblog maintained by Brough Turner click here.


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