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Digital vulnerability and performance of firms in developing countries

Author

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  • Joël Cariolle
  • Maelan Le Goff
  • Olicier Santoni

Abstract

This paper provides evidence of large positive effects of Internet use on local firm performance, using a sample of some 30,000 firms from 38 developing and transition countries. We adopt an IV approach emphasizing firm’s digital vulnerability to seismic shocks upon the telecommunications submarine cable network, and find that a 10% increase in Internet incidence raises by 36% their total annual sales, by 26% sales per worker, by 12% the number of permanent workers. Contrary to other studies on the effect of ICT adoption on trade, we do not find significant evidence on firms’ exports. A greater use of Internet by manufactures is also found to increase their number of production (unskilled) workers in a larger extent than non-production workers, which nuances recent evidence on a skilled-biased digital revolution. The concern for omitted variable bias, reverse causality or measurement error is lowered by proceeding to a wide range of restrictions upon the sample composition and the instrument set calibration, and by controlling for location, sector, year, country-by-year fixed effects.

Suggested Citation

  • Joël Cariolle & Maelan Le Goff & Olicier Santoni, 2019. "Digital vulnerability and performance of firms in developing countries," Working papers 709, Banque de France.
  • Handle: RePEc:bfr:banfra:709
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    References listed on IDEAS

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    Cited by:

    1. Joël Cariolle & Maëlan Le Goff, 2021. "Spatial internet spillovers in manufacturing," Working Papers hal-03201735, HAL.
    2. Luc Jacolin & Massil Keneck & Alphonse Noah, 2019. "Informal Sector and Mobile Financial Services in Developing Countries: Does Financial Innovation Matter?," Working papers 721, Banque de France.
    3. Clémence Vergne & Camille Laville, 2018. "Comment analyser le risque sociopolitique ? Une composante clé du risque-pays," Post-Print hal-02358975, HAL.
    4. Joël Cariolle & Michele Imbruno & Jaime de Melo, 2020. "Bilateral digital connectivity and firm participation in export markets," Working Papers hal-03182438, HAL.
    5. Joel Cariolle, 2018. "Telecommunication Submarine-C able Deployment and the Digital Divide in Sub-Saharan Africa [fondation pour les études et recherches sur le développement international Telecommunication Submarine- C," Post-Print hal-01938451, HAL.
    6. Joel Cariolle & Jenny Aker, 2020. "The Use of Digital for Public Service Provision in Sub-Saharan Africa," Post-Print hal-03003899, HAL.
    7. Joël Cariolle & David Carroll, 2020. "Digital Technologies for Small and Medium Enterprises and job creation in Sub-Saharan Africa," Working Papers hal-03004583, HAL.

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    More about this item

    Keywords

    ICT; Internet; Submarine Cables; Seismic Shocks; Firm Performance.;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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