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Policy reform, economic growth, and the digital divide - an econometric analysis

Author

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  • Dasgupta, Susmita
  • Lall, Somik
  • Wheeler, David

Abstract

Rapid growth of Internet use in high-income economies, has raised the specter of a"digital divide"that will marginalize developing countries, because they can neither afford Internet access, nor use it effectively when it is available. Using a new cross-country data set, the authors investigate two proximate determinants of the digital divide: Internet intensity (Internet subscriptions per telephones mainline), and access to telecom services. Surprisingly, they find no gap in Internet intensity. When differences in urbanization, and competition policy are controlled for, low-income countries have intensities as high as those of industrial countries. While income does not seem to matter in this context, competition policy matters a great deal. Low-income countries with high World Bank ratings for competition policy, have significantly higher Internet intensities. The authors'findings on Internet intensity implies that the digital divide is not really new, but reflects a persistent gap in the availability of mainline telephones services. After identifying mobile telephones as a promising new platform for Internet access, they use panel data to study the determinants of mobile telephone diffusion during the past decade. Their results show that income explains part of the diffusion lag for poor countries, but they also highlight the critical role of policy. Developing countries whose policies promote economic growth, and private sector competition, have experienced much more rapid diffusion of mobile telephone services. Simulations based on the econometric results, suggest that feasible reforms could sharply narrow the digital divide during the next decade for many countries in Africa, Asia, and Latin America. The authors'review of the literature, also suggests that direct access promotion would yield substantial benefits for poor households, and that cost-effective intervention strategies are now available.

Suggested Citation

  • Dasgupta, Susmita & Lall, Somik & Wheeler, David, 2001. "Policy reform, economic growth, and the digital divide - an econometric analysis," Policy Research Working Paper Series 2567, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2567
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    References listed on IDEAS

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    3. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
    4. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
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    Citations

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    Cited by:

    1. Wallsten, Scott, 2003. "Regulation and internet use in developing countries," Policy Research Working Paper Series 2979, The World Bank.
    2. Krüger, Jens J. & Rhiel, Mathias, 2016. "Determinants of ICT infrastructure: A cross-country statistical analysis," Darmstadt Discussion Papers in Economics 228, Darmstadt University of Technology, Department of Law and Economics.
    3. Clarke, George R.G. & Wallsten, Scott J., 2004. "Has the internet increased trade? Evidence from industrial and developing countries," Policy Research Working Paper Series 3215, The World Bank.
    4. Andres, Luis & Cuberes, David & Diouf, Mame Astou & Serebrisky, Tomas, 2007. "Diffusion of the internet : a cross-country analysis," Policy Research Working Paper Series 4420, The World Bank.
    5. Johnston, Craig M.T., 2016. "Global paper market forecasts to 2030 under future internet demand scenarios," Journal of Forest Economics, Elsevier, vol. 25(C), pages 14-28.
    6. Margarita Billón & Roberto Ezcurra & Fernando Lera-López, 2008. "The Spatial Distribution of the Internet in the European Union: Does Geographical Proximity Matter?," European Planning Studies, Taylor & Francis Journals, vol. 16(1), pages 119-142, January.
    7. Menzie D. Chinn & Robert W. Fairlie, 2007. "The determinants of the global digital divide: a cross-country analysis of computer and internet penetration," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 16-44, January.
    8. Andrea Bonaccorsi & Lucia Piscitello & Cristina Rossi, 2007. "Explaining the Territorial Adoption of New Technologies: A Spatial Econometric Approach," Chapters,in: Applied Evolutionary Economics and Economic Geography, chapter 12 Edward Elgar Publishing.
    9. Buys, Piet & Dasgupta, Susmita & Thomas, Timothy S. & Wheeler, David, 2009. "Determinants of a Digital Divide in Sub-Saharan Africa: A Spatial Econometric Analysis of Cell Phone Coverage," World Development, Elsevier, vol. 37(9), pages 1494-1505, September.
    10. Menzie D. Chinn & Robert W. Fairlie, 2010. "ICT Use in the Developing World: An Analysis of Differences in Computer and Internet Penetration," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 153-167, February.
    11. Charles Amo Yartey, 2006. "Financial Development, the Structure of Capital Markets, and the Global Digital Divide," IMF Working Papers 06/258, International Monetary Fund.
    12. Cuberes, David, 2008. "The Diffusion of Internet: A Cross-Country Analysis," MPRA Paper 8433, University Library of Munich, Germany.
    13. Muller, Patrice, 2002. "Internet Use in Transition Economies: Economic and Institutional Determinants," WIDER Working Paper Series 095, World Institute for Development Economic Research (UNU-WIDER).
    14. Hazlett, Thomas W. & Muñoz, Roberto E., 2009. "Spectrum allocation in Latin America: An economic analysis," Information Economics and Policy, Elsevier, vol. 21(4), pages 261-278, November.
    15. Yartey, Charles Amo, 2008. "Financial development, the structure of capital markets, and the global digital divide," Information Economics and Policy, Elsevier, vol. 20(2), pages 208-227, June.
    16. Jeffrey James, 2010. "Penetration and Growth Rates of Mobile Phones in Developing Countries: An Analytical Classification," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 99(1), pages 135-145, October.
    17. Shchetinin, Oleg & Baptiste, Massenot, 2008. "How to Overcome the Digital Divide? The Determinants of Internet Diffusion," MPRA Paper 9413, University Library of Munich, Germany.
    18. Susmita Dasgupta & Somik Lall & David Wheeler, 2005. "Policy Reform, Economic Growth and the Digital Divide," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 229-243.
    19. Maria Rosalia Vicente & Ana Jesus Lopez, 2008. "Some empirical evidence on Internet diffusion in the New Member States and Candidate Countries of the European Union," Applied Economics Letters, Taylor & Francis Journals, vol. 15(13), pages 1015-1018.
    20. Clarke, George R.G., 2002. "Does Internet Connectivity Affect Export Performance? Evidence from Transition Economies," WIDER Working Paper Series 074, World Institute for Development Economic Research (UNU-WIDER).
    21. Clarke, George R.G., 2001. "Bridging the digital divide - how enterprise ownership and foreign competition affect Internet access in Eastern Europe and Central Asia," Policy Research Working Paper Series 2629, The World Bank.
    22. Feng, Guangchao Charles, 2015. "Determinants of Internet diffusion: A focus on China," Technological Forecasting and Social Change, Elsevier, vol. 100(C), pages 176-185.

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