Information and Communication Technology Use and Economic Growth

Maryam Farhadi,Rahmah Ismail,Masood Fooladi,Rodrigo Huerta-Quintanilla

doi:10.1371/journal.pone.0048903

Abstract

In recent years, progress in information and communication technology (ICT) has caused many structural changes such as reorganizing of economics, globalization, and trade extension, which leads to capital flows and enhancing information availability. Moreover, ICT plays a significant role in development of each economic sector, especially during liberalization process. Growth economists predict that economic growth is driven by investments in ICT. However, empirical studies on this issue have produced mixed results, regarding to different research methodology and geographical configuration of the study. This paper examines the impact of Information and Communication Technology (ICT) use on economic growth using the Generalized Method of Moments (GMM) estimator within the framework of a dynamic panel data approach and applies it to 159 countries over the period 2000 to 2009. The results indicate that there is a positive relationship between growth rate of real GDP per capita and ICT use index (as measured by the number of internet users, fixed broadband internet subscribers and the number of mobile subscription per 100 inhabitants). We also find that the effect of ICT use on economic growth is higher in high income group rather than other groups. This implies that if these countries seek to enhance their economic growth, they need to implement specific policies that facilitate ICT use.

Highlights

At the present time, information and communication technology (ICT) has become a serious part of economy
This study calculates the ICT use index applying the Principal Component Analysis (PCA), following the two reports -measuring the information society in 2009 and 2010- presented by International Telecommunication Union (ITU)
The ICT use indicators which are used to construct the index are all collected from ITU database

Summary

Introduction

ICT has become a serious part of economy. Almost all firms and consumers use computers and Internet connection for economic purposes, such as providing consumers with a more diversified and customized products, improving product quality, and selling goods and services. The extension of ICT and its influences on economic growth in both developed and developing countries has increased very fast during the last two decades. Country data on computer, cell phone, and Internet users illustrate different ICT diffusion rates across countries and regions, ICT use indicators illustrate an increasing trend, despite the recent world economic crisis (Figure 1). The steady growth of the number of mobile cellular subscriptions is noticeable, reaching 67 per 100 inhabitants by the end of 2009 globally. This confirms that consumers are willing to continue spending part of their disposable income on mobile services - even at times of financial constraints [1]

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Results

Conclusion