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Telecommunications Infrastructure And Economic Development: A Simultaneous Approach

Listed author(s):
  • Röller, Lars-Hendrik
  • Waverman, Leonard

This paper investigates how telecommunications infrastructure affects economic growth. This issue is important and has received considerable attention in the popular press concerning the creation of the 'information superhighway' and its potential impacts on the economy. We use evidence from 21 OECD countries over a twenty-year period to examine the impacts that telecommunications developments may have had. We estimate a structural model, which endogenizes telecommunication investment by specifying a micro-model of supply and demand for telecommunication investments. The micro-model is then jointly estimated with the macro-growth equation. After controlling for country-specific fixed effects, we find evidence of a significant positive causal link, especially when a critical mass of telecommunications infrastructure is present. Interestingly, the critical mass appears to be at a level of telecommunications infrastructure that is near universal service.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2399.

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Date of creation: Mar 2000
Handle: RePEc:cpr:ceprdp:2399
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  1. Hardy, Andrew P., 1980. "The role of the telephone in economic development," Telecommunications Policy, Elsevier, vol. 4(4), pages 278-286, December.
  2. Gene M. Grossman & Elhanan Helpman, 1994. "Endogenous Innovation in the Theory of Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 23-44, Winter.
  3. Greenstein, Shane M & Spiller, Pablo T, 1995. "Modern Telecommunications Infrastructure and Economic Activity: An Empirical Investigation," Industrial and Corporate Change, Oxford University Press, vol. 4(4), pages 647-665.
  4. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  5. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-1196, September.
  6. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
  7. Quah, Danny, 1993. "Empirical cross-section dynamics in economic growth," European Economic Review, Elsevier, vol. 37(2-3), pages 426-434, April.
  8. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
  9. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  10. John G. Fernald, 1999. "Roads to Prosperity? Assessing the Link between Public Capital and Productivity," American Economic Review, American Economic Association, vol. 89(3), pages 619-638, June.
  11. Olivier Cadot & Lars-Hendrik Röller & Andreas Stephan, 1999. "A Political Economy Model of Infrastructure Allocation: An Empirical Assessment," CIG Working Papers FS IV 99-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  12. Shane M. Greenstein & Pablo T. Spiller, 1996. "Estimating the Welfare Effects of Digital Infrastructure," NBER Working Papers 5770, National Bureau of Economic Research, Inc.
  13. Holtz-Eakin, Douglas, 1993. "State-specific estimates of state and local government capital," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 185-209, April.
  14. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
  15. Garcia-Mila, Teresa & McGuire, Therese J., 1992. "The contribution of publicly provided inputs to states' economies," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 229-241, June.
  16. Norton, Seth W, 1992. "Transaction Costs, Telecommunications, and the Microeconomics of Macroeconomic Growth," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 175-196, October.
  17. Alicia H. Munnell, 1992. "Policy Watch: Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-198, Fall.
  18. Pereira, Alfredo M. & de Frutos, Rafael Flores, 1999. "Public Capital Accumulation and Private Sector Performance," Journal of Urban Economics, Elsevier, vol. 46(2), pages 300-322, September.
  19. Leff, Nathaniel H, 1984. "Externalities, Information Costs, and Social Benefit-Cost Analysis for Economic Development: An Example from Telecommunications," Economic Development and Cultural Change, University of Chicago Press, vol. 32(2), pages 255-276, January.
  20. Quah, Danny, 1993. " Galton's Fallacy and Tests of the Convergence Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 427-443, December.
  21. J. Bradford De Long & Lawrence H. Summers, "undated". "How Strongly Do Developing Countries Benefit from Equipment Investment?," J. Bradford De Long's Working Papers _108, University of California at Berkeley, Economics Department.
  22. Frank R. Lichtenberg, 1993. "The Output Contributions of Computer Equipment and Personnel: A Firm- Level Analysis," NBER Working Papers 4540, National Bureau of Economic Research, Inc.
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