Phillip Stephenson

Telecommunications and Growth Phillip Stephenson

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.