Mobile communication networks and Internet technologies as drivers of technical efficiency improvement

Abstract

Empirical research on the determinants of technical efficiency (TE) is essential for policy formulation, in particular in low-income countries.In this study, we estimate the variations of TE between 1980 and 2009 in 23 low-income countries and 18 high-income countries, and demonstrate that TE has increased in both country groups in view of the deployment of mobile communication networks and Internet technologies. For low-income countries, we also prove that the causal relation is from the deployment of mobile networks and Internet technologies towards the increase of TE.More specifically, by estimating the stochastic production frontier for a flexible transcendental logarithmic production function under the assumption of fixed effects, we show that the increase in TE per additional mobile phone and Internet subscriber is the highest in Latin American and Asian countries, but the accrued TE increase in response to Internet usage is the largest in high-income countries due to an overly higher Internet diffusion.Having established that modern information and communication technologies improve the TE, we conclude discussing policies that lead to the spread of such technologies, particularly in low-income countries.