Low Latency Internet and Economic Growth: ASimultaneous Approach.

Low Latency Internet and Economic Growth: ASimultaneous Approach.

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Given the quality of the available data on Internet access across several countries, itis necessary to evaluate alternative measures to assess the effect of Internet access oneconomic outcomes.The next research, of JochenLüdering, published august 2016, at hand builds up on an earlier paper, which introduced a novel measureof Internet quality. A logical consequence has been to introduce the new indicator(average latency for a country) into established models of economic growth.

The dataused in this analysis spans the period from 2008 to 2014 and covers 155 countries.

Thefindings largely confirm previous results, that Internet access is beneficial to economicgrowth and emphasize the appropriateness of technical measures of Internet qualityfor economic analysis.

Apart from providing insight into the quality dimension thesemeasures do not rely on survey data, but can be obtained directly requiring only alow level of investment, making the data collection process viable even for smallerinstitutions.

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The preceding analysis shows that the direct measure of latency can be used as a proxy of Internetquality.

The estimation technique builds up on the methodology by Röller and Waverman (2001)and Koutroumpis (2009) to mitigate the potential for simultaneity.Using latency as a proxy for ICT quality make it possible to obtain information on the infrastructurequality on a variety of countries without relying on data collected by a country’s authorities.This increases the number of countries on which consistent information on Internet quality areavailable. Thus, the sample covers 155 countries compared to the subset of OECD countriesusually used in previous papers.

The evidence from the analysis confirms the strong effect of ICT infrastructure on economicdevelopment established in Koutroumpis (2009) and Czernich et al. (2011).

While these previousstudies have established that Internet usage is an important factor for growth, my contributionsfinds that it is also the quality of the infrastructure that matters. This implies that despite anarrowing digital divide in terms of users, the qualitative dimension is also important.

 

Notes

Röller, L.-H.and L. Waverman (2001). “Telecommunications Infrastructure and Economic Development:A Simultaneous Approach”. In: American Economic Review 91.4, pp. 909–923.

 Koutroumpis, P. (2009). “The economic impact of broadband on growth: A simultaneous approach”.In:TelecommunicationsPolicy33.9, pp. 471–485.

 Czernich, N., O. Falck, T. Kretschmer, and L. Woessmann (2011).“Broadband Infrastructure andEconomic Growth”. In: Economic Journal 121.552, pp. 505–532.

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