Nonlinear Effect of Information and Communication Technology on Economic Growth Convergence : the Case of 36 Asian Countries

Abstract

Over the past decades, many economies observed that the development of Information and Communication Technology (ICT) has increased productivity in various industries. This paper empirically examines an economic growth convergence under the presence of the ICT by using panel data for 36 Asian countries from 1990 to 2017. The ICT can directly work as a driving force for productivity and indirectly as a technology propagator. As a technology propagator, the ICT deserves more attention as a source of technology diffusion. Despite many existing studies on the diffusion, theoretical studies have not yet incorporated the ICT into the diffusion issue in discussing the growth convergence. Responding to the unfilled gap in the literature, we impose a nonlinear functional form on the relation between the ICT and economic growth rate. In this paper, we employ a semi-parametric partially linear model (PLM) to relate the ICT elements to the growth convergence. In this paper, we compare fixed-effect results to the PLM results. Our results show that, controlling the ICT nonlinearly, the absolute size of the estimates for the GDP per capita increases as the frequency of growth rates becomes lower. We also find that, for the GDP per capita, the PLM estimates’ absolute values are greater relative to the fixed-effect results for all the frequencies. Our findings imply that considering nonlinearity of the ICT variable enhances understanding of economic growth convergence. We also perform the specification-fit test for PLM estimation and find that the nonlinear specification of the ICT variable is suitable. Further, we observe that the fitted curves of nonlinear functions are hump-shaped for all the frequencies. Then, it is implied that there can exist optimal level of the ICT for its contribution to the economic growth. In sum, all the results suggest that nonlinear modeling is a suitable empirical strategy for the relationship between the ICT and economic growth.