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Nauro F. Campos Centre for Economic Development and Institutions Brunel University, CEPR and IZA

The Impact of Information and Communication Technologies on Economic Growth in Latin America in International Perspective. Nauro F. Campos Centre for Economic Development and Institutions Brunel University, CEPR and IZA. For presentation at the

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Nauro F. Campos Centre for Economic Development and Institutions Brunel University, CEPR and IZA

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  1. The Impact of Information and Communication Technologies on Economic Growth in Latin America in International Perspective Nauro F. Campos Centre for Economic Development and Institutions Brunel University, CEPR and IZA For presentation at the Digital Transformations in the Information SocietyConference Geneva, June 2006

  2. Brief Project Overview • Part of a large research project trying to measure digital divide, focus on LAC • United Nations Economic Commission for Latin America (all opinions are mine) • Teams working on Growth Accounting Possible firm-level TICness indicators • Here: macro impact of TIC (LAC vs. World)

  3. Research Questions • What is the impact of ICT on growth in LAC? • Is this impact smaller in LAC than in other regions of the world (OECD, Asia, Eastern Europe, Africa)? • Has the impact of ICT on Latin American growth changed since 1960?

  4. Broadly Related Literature • Evidence from labour economics, e.g. Dolton and Makepeace (EJ 2004) • Evidence from firm-level studies, e.g. Brynjolfsson and Hitt (REStat 2003)  • Evidence from growth accounting, e.g. Jorgenson (Handbook Econ Growth 2005) • Focus here is on TIC’s growth payoff using aggregate production function framework

  5. Closely Related Literature 1963: Jipp, A., “Wealth of Nations and Telephone Density,” Telecomm Journal 1980: Hardy, A., “The role of the telephone in economic development,” Telecomm Policy 15 DCs + 45 LDCs, phones yes radios no, no effects on split samples 1991: Cronin et al., “Telecommunications Infrastructure and Economic Growth: An Analysis of Causality,’ Telecomm Policy Feedback system (annual data)

  6. Closely Related Recent Literature 2001: Röller and Waverman (AER) Reverse causality, OECD countries 2004: Sridhar and Sridhar (WIDER conf) Extend RW; find impact smaller in LDCs 2004: Teltscher and Korka (Infodensity ITU) 147 countries; ICT elasticity btw .1/.3 2005: Waverman, Mescchi and Fuss (TPRC conf) Impact of ICT on growth larger in LDCs

  7. Lessons from Recent LiteratureWhat are desirable next steps? • DATA: PANEL • PANEL ESTIMATION • ENDOGENEITY • POOLABILITY • ICT COMPOSITE and INSTITUTIONS

  8. What have we done in this project? • DATA: PANEL: put together extensive panel data set: 170 countries, 1960 to 2005 (5-year avgs), 42 ICT indicators • ESTIMATION: exploit panel aspect, std & endogenous growth model (Islam, QJE 1995) • ENDOGENEITY: exploratory Granger-causality • POOLABILITY: supports runs by individual regions

  9. Poolability issues • 153 countries; 5-year averages since 1960 (9 periods max); 1110 observations • Can we pool the data? • Is the model for OECD the same as for Africa? Are the coefficients the same? • The answer for our data is that you should NOT pool all data together… • … but you can pool by region! • OECD, LAC, MENA, Asia, Africa, TEs

  10. Endogeneity concerns • 150 countries; 5-year averages since 1960 • Fixed and mobile penetration • Granger-causality tests:

  11. Baseline results (fixed-effects)

  12. Baseline results (cont)

  13. Baseline results (LAC only)

  14. Summary of regression results Aggregate production model: OECD only fixed (>LAC) LAC fixed and mobile Asia fixed and mobile (>LAC) AFRICA fixed and mobile (<LAC) MENA only fixed TEs fixed and mobile (<LAC)

  15. Endogenous growth model

  16. Endogenous growth model (cont)

  17. Summary of regression results Endogenous growth model: OECD weak for mobile LAC only fixed Asia only fixed (>LAC) AFRICA only mobile MENA only mobile

  18. Conclusions • ICT have large impact on growth even in the poorest countries • Impact seems robust: different regions • Impact seems robust: reverse causality

  19. Extensions • Institutions? Adequate investment climate, regulatory framework and economic reforms seem necessary to growth and will be incorporated • An aggregate indicator of TICness

  20. ICT Indicators • Standard measures: fixed phone lines and mobile phone lines penetration • A composite indicator capturing the multi-faceted nature of ICT is desirable • An index of TICness?

  21. TICness Index • 140 countries; 3 points in time: 1990-1994, 1995-1999 and 2000-2004 • Goal-post method, equal weights • Six underlying variables: • mobile penetration (per capita) • import of telecom equip (%GDP) • outgoing international calls (per capita) • Internet hosts (per capita) • price of internet connection • high-technology exports (%GDP)

  22. Thank you

  23. Existing ICT Indicators

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