Telecommunications and Growth

Telecommunications infrastructure is recognized as a§catalyst for economic§growth. The literature has identified how§infrastructure contributes to growth, ways that§telecommunications specifically contributes,§and empirically confirmed a significant, positive§bi-directional relationship§between telecommunications infrastructure and growth.§More recently, the technological innovations in§telecommunications in the 90s have sparked a debate§about whether these technologies have created a§"digital divide." This work reviews this underlying§theory and the debates surrounding this subject. §Data for this analysis include 79 countries for the§years 1981-2000. The model is regressed using§ordinary least squares, a panel-data method, and§finally it is instrumented to attempt to control for§endogeneity. The instruments utilized in§this investigation prove to be ineffective. The§results of the empirical work confirm§that there is a strong relationship between§telecommunications and growth; that the§technological revolution of the 1990s dramatically§strengthened this relationship;§and that these benefits are biased towards more§developed countries, confirming the§existence of a digital divide.