Internet Use and Economic Growth: Evidences From Lower Middle Income and Low Income Countries

Internet Use and Economic Growth: Evidences From Lower Middle Income and Low Income Countries

Abhijit Bhattacharya (Pingla Thana Mahavidyalaya, India) and Archita Ghosh (University of Kalyani, India)
DOI: 10.4018/978-1-5225-2361-1.ch004
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A good infrastructure is actually the base behind the growth of an economy. In the present age of globalization accessibility of information is a very important component of infrastructure. Studies carried out on the effect of internet on economic growth are mostly either on high income countries only or on a large number of countries belonging to different income groups. Keeping in mind the differential impact of internet on economic growth of countries with different initial conditions, we have attempted in this chapter a study on the impact of internet use on economic growth in 39 lower middle income and low income countries during 2002-2011. Applying panel data regression techniques we have found a positive significant impact of internet use on economic growth of low income countries. The emergence of crisis adversely affected this growth process, overruling the positive impact of internet use.
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Literature Review

The literature on ICT infrastructure and growth are steadily growing. A study by the World Bank on infrastructure (World Development Report, 1994) focused the critical role of infrastructure in the development of an economy. According to some researchers ICT infrastructure lowers both fixed and variable costs of participating in markets (Norton, 1992). So, ICT infrastructure including telecommunication and their derived services provide huge benefits to an economy.

The first analysis of the impact of fixed telephone density on economic growth was done in the mid-1970s by the researchers of the World Bank. Gradually with the improvement in the quality of data and sophistication of econometric tools it requires further justification of the impact of ICT.

Key Terms in this Chapter

Economic Growth: Economic growth is defined as the rate of change in the inflation-adjusted market value of the goods and services produced by an economy over time. It is measured as the percent rate of increase in real gross domestic product, or real GDP, usually in per capita terms.

Internet: The Internet is the global system of interconnected computer networks that use the Internet protocol suite (TCP/IP) to link billions of devices worldwide. It is a network of networks that consists of millions of private, public, academic, business, and government networks of local to global scope, linked by a broad array of electronic, wireless, and optical networking technologies. The Internet carries an extensive range of information resources and services, such as the inter-linked hypertext documents and applications of the World Wide Web (WWW), electronic mail, telephony, and peer-to-peer networks for file sharing. In our study we have considered internet use per 100 people and also per capital form.

Income Wise Classification of Countries: World Bank has divided economies in different groups/ categories on the basis of their per capita income. We have considered the classification provided by the World Bank. According to 2006 GNI per capita, low income group has the per capita income (PCI) of $905 or less; PCI of lower middle income group and upper middle income group ranges from $906 to $3,595 and from $3,596 to $11,115 respectively and that of high income group is $11,116 or more.

Panel Data: In statistics and econometrics, the term panel data refers to multi-dimensional data frequently involving measurements over time. Panel data contain observations of multiple phenomena obtained over multiple time periods for the same firms or individuals. In short panel data captures both cross-sectional and time dimension of data.

Globalization: Globalization is the process of integrating countries in many aspects like movement of products, capital (both physical and financial) labour, managerial techniques, views, ideas, culture etc. Advances in different types of transportation and telecommunications infrastructure comprising of Internet, mobile phones etc. have been major factors in globalization, generating further interdependence of economic and cultural activities. In short globalization brings all the countries of the world under a common roof.

ICT: Information and communications technology (ICT) is an extended term for information technology (IT) that describes the role of unified communications and the integration of telecommunications (telephone lines and wireless signals), computers as well as necessary enterprise software, middleware, storage, and audio-visual systems, which enable users to access, store, transmit, and manipulate information.

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