The Impact of Information and Communication Technologies

on Economic Growth in Latin America in International

Perspective

Nauro F. CamposCentre for Economic Development and Institutions

Brunel University, CEPR and IZA

For presentation at the

Digital Transformations in the Information Society Conference

Geneva, June 2006

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 onGrowth AccountingPossible firm-level TICness indicators

• Here: macro impact of TIC (LAC vs. World)

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?

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

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)

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

Lessons from Recent LiteratureWhat are desirable next steps?

• DATA: PANEL

• PANEL ESTIMATION

• ENDOGENEITY

• POOLABILITY

• ICT COMPOSITE and INSTITUTIONS

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

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

Endogeneity concerns

• 150 countries; 5-year averages since 1960

• Fixed and mobile penetration

• Granger-causality tests:

coefficient

[p-value]

Fixed lines

penetration

Mobile lines

penetration

TIC to Growth? .001

[0.140]

.003

[.001]

Growth to TIC? 1.01

[0.540]

-5.37

[0.462]

Baseline results (fixed-effects)

(1) (2) (3) (4) (5)

Capital 0.132*** 0.140*** -0.0201 0.165*** -0.0254

[0.043] [0.043] [0.039] [0.042] [0.039]

Population -0.197*** -0.175*** -0.485*** -0.144*** -0.114***

[0.035] [0.033] [0.033] [0.032] [0.025]

Leg. Effectiveness -0.00215 -0.00168 -0.00044 -0.00074 -0.00031

[0.0022] [0.0021] [0.0016] [0.0017] [0.0015]

OECD 1.209*** 1.165*** 0.464** 1.144*** 0.422**

[0.22] [0.20] [0.19] [0.20] [0.18]

Latin America -0.067 -0.061 -0.112 -0.0589 -0.105

[0.22] [0.21] [0.19] [0.21] [0.17]

Asia -0.471* -0.504** -0.176 -0.519** -0.173

[0.25] [0.23] [0.20] [0.23] [0.18]

Transition -0.103 -0.0879 -0.312 -0.0981 -0.383**

[0.24] [0.23] [0.21] [0.23] [0.19]

Africa -1.402*** -1.349*** -0.593*** -1.323*** -0.541***

[0.22] [0.21] [0.21] [0.21] [0.19]

Baseline results (cont)

(1) (2) (3) (4) (5)

Mobile penetration 0.0209***

[0.0034]

Fixed penetration 0.351***

[0.023]

Mobile per capita 0.0923***

penetration [0.010]

Fixed per capita 0.371***

penetration [0.022]

Constant 10.67*** 10.31*** 11.71*** 9.768*** 9.779***

[0.65] [0.60] [0.52] [0.60] [0.47]

Time dummies? Yes Yes Yes Yes Yes

Observations 1110 1110 1035 1110 1035

Number of countries 153 153 153 153 153

R-squared 0.6328 0.6544 0.7972 0.6660 0.8155

Baseline results (LAC only)

Mobile penetration 0.0137**

[0.0068]

Fixed penetration 0.362***

[0.051]

Mobile pc penet 0.101***

[0.037]

Fixed pc penet 0.356***

[0.050]

Constant 9.605*** 9.486*** 10.45*** 9.292*** 8.791***

[0.85] [0.77] [0.66] [0.79] [0.62]

Time dummies? Yes Yes Yes Yes Yes

Observations 214 214 188 214 188

Number of countries 24 24 24 24 24

R-squared 0.0924 0.1139 0.6306 0.1229 0.6240

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)

Endogenous growth model(1) (2) (3) (4) (5)

Initial income -0.0114*** -0.0133*** -0.0185*** -0.0115*** -0.0186***

[0.0022] [0.0023] [0.0033] [0.0022] [0.0033]

Capital 0.0362*** 0.0366*** 0.0355*** 0.0364*** 0.0356***

[0.0043] [0.0042] [0.0047] [0.0043] [0.0047]

Population -0.00069 -0.0012 -0.0061*** -0.00064 -0.0003

[0.00087] [0.00088] [0.0021] [0.00085] [0.00088]

Human capital 0.00183 0.00290* 0.00129 0.00216 0.00128

[0.0015] [0.0015] [0.0018] [0.0015] [0.0018]

Leg. Effectiveness 0.000328** 0.00035*** 0.000340** 0.000333** 0.000339**

[0.00014] [0.00014] [0.00015] [0.00014] [0.00015]

OECD 0.0275*** 0.0259*** 0.0242*** 0.0269*** 0.0243***

[0.0072] [0.0069] [0.0069] [0.0070] [0.0069]

Latin America 0.00356 0.00251 0.00196 0.00327 0.00196

[0.0065] [0.0064] [0.0064] [0.0064] [0.0064]

Asia 0.0174*** 0.0152** 0.0176*** 0.0170*** 0.0176***

[0.0063] [0.0061] [0.0061] [0.0061] [0.0061]

Transition 0.0229** 0.0199** 0.0218** 0.0220** 0.0219**

[0.0097] [0.0097] [0.0093] [0.0094] [0.0094]

Africa -0.00662 -0.00742 -0.00312 -0.0065 -0.00319

[0.0068] [0.0067] [0.0069] [0.0066] [0.0069]

Endogenous growth model (cont)

Mobile penetration 0.00140***

[0.00031]

Fixed penetration 0.00580***

[0.0018]

Mobile pc penet 0.000552**

[0.00089]

Fixed pc penet 0.00582***

[0.0018]

Constant 0.0124 0.0328 0.0924** 0.0112 0.0657*

[0.025] [0.026] [0.041] [0.025] [0.035]

Time dummies? Yes Yes Yes Yes Yes

Observations 829 829 780 829 780

Number of countries 105 105 105 105 105

R-squared 0.3626 0.3816 0.3927 0.3647 0.3925

Summary of regression results

Endogenous growth model:

OECD weak for mobile

LAC only fixed

Asia only fixed (>LAC)

AFRICA only mobile

MENA only mobile

Conclusions

• ICT have large impact on growth even in the poorest countries

• Impact seems robust: different regions

• Impact seems robust: reverse causality

Extensions

• Institutions? Adequate investment climate, regulatory framework and economic reforms seem necessary to growth and will be incorporated

• An aggregate indicator of TICness

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?

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)

0

0.05

0.1

0.15

0.2

0.25

oecd lac asiamenaafricaoecd lac asiamenaafricaoecd lac asiamenaafricaoecd lac asia 1990-94 mena africa

Thank you

Existing ICT Indicators

ArCo DAI DOI EIU IKS KEI NRI Orbicom TAI UNCTAD UNPAN WBICT

Index Name

Technology

Capabilities for

Countries

Digital Access Index

Digital Opportunity

Index

e-readiness ranking

Index of Knowledge

Societies

Knowledge Economy

Index

Network Readiness

IndexInfostate

Technology Achieveme

nt Index

Index of ICT

Diffusion

E-Government Readiness

Index

ICT Index

Publisher Archibugi

& CocoITU ITU

Economist Intelligence Unit (EIU)

UN Department

of Econ &Social Affairs

World Bank Institute

World Economic

ForumOrbicom UNDP UNCTAD

UN Division

PAN World Bank

Pub date 2003 Dec-03 2005 April 2005 2005 2005 March 2005 2003 2001 2005 Nov. 2004 2005

Countries 162 178 40 65 45 128 104 139 72 165 191 144

Variables 8 8 11 ~100 14 80 51 19 8 11 8 15

Subjective variables

No No No Yes** No Yes* Yes* No No Yes** Yes** No

# publications

1 1 1 6 1 NA 4 2 1 2 3 1

Data year 2000 2002 2003 No mention No mention 2003 No mention 2001 1995-2000 2002 2000-2002 2004

Historical comparisons

1990, 2000

1998 & 2002 for

40 countries

No

Previous year; index

has been changed

No1995, latest

data

Previous year; index has changed

Scores provided for 1996-2001

NoRankings for 1995,

1999-2002

Previous year;

methodology changed between 1

and 2 publication

No