A Global Investigation of Granger Causality between Information Infrastructure Investment and Service-Sector Growth

Abstract

Over the past two decades, both developed and developing countries have been investing a significant portion of their resources in the creation of an information infrastructure. However, speculation abounds regarding the efficacy of information infrastructure investments, especially when the opportunity cost for investing in information technology (IT) is measurably high among developing nations. This longitudinal study introduces and explores infrastructure development and service-sector growth as key metrics for IT investment success. It also traces the notional evidence of IT infrastructure development as mediating the causal relationship between information infrastructure investments and service-sector growth. Using data from low-income, middle-income, and high-income countries, the mediating and lagged impact of information infrastructure on service-sector growth reveals that information infrastructure development does play a significant role as a mediator. It points out that information infrastructure investments can be a misleading causal antecedent if countries fail to develop their infrastructure. It also provides evidence of a recursive relationship between infrastructure development and service-sector growth. An exploratory time-series analysis across different country categories suggests that information infrastructures must be properly developed to reconcile the paradox. In addition, exploratory tests reveal a distinct divergence between infrastructure investments and infrastructure development among different country tiers.