Telecommunications development and economic growth in Africa

Abstract

This study tries to assess the impact of telecommunications penetration on peoples' living standards in Africa through their impact on per capita income growth. This was motivated by the curiosity to find out if the telecommunications growth being experienced by African countries translates into economic growth through its impact on people's living standards. Barro's [1991] endogenous growth model is employed to estimate the impact of mobile, fixed telephone main lines and the use of the Internet on per capita income in a cross-country analysis covering 49 countries in Africa. The overall results indicate that the telephone main lines and mobile telephony have a significant impact on the people's living standards in Africa, while Internet usage does not have a significant contribution towards economic growth. However, when these countries are categorized into the three groups following the 2008 World Bank classification criteria of being upper-middle, upper-low and low-income countries, the results show that fixed telephony, mobile telephony and the Internet usage have a significant impact on growth in the upper-middle-income countries, while only the mobile telephone penetration has a significant impact on growth in both the upper-low-income and the low-income countries in Africa. The mobile growth effect is the largest among the country groups.

Keywords:

• telecommunications development
• economic growth
• per capita income
• endogenous growth model
• Africa

Acknowledgement

I am grateful to Dr Mina Baliamoune-Lutz and the anonymous reviewer for their very helpful comments.

Notes

Mina Baliamoune-Lutz is the accepting Associate Editor for this article.

See www.worldbank.org/connectafrica

Technophilics believe that telecommunications have a positive effect on development while technophobics claim that telecommunications increase the existing inequality between the different groups of people within a country and between countries (Batuo, 2008).

For Africa, see Chowdhury and Wolf (2006), Nkama (2007) and Mouelhi (2009).

See Kearney (2011). “Offshoring opportunities amid economic turbulence,” The A.T. Kearney Global Services Location Index, 2011, at www.atkearney.com (accessed March 2012) and Republic of Mauritius, Mauritius Survey of Employment and Earnings in large establishments (2008) and (2009).

Note that the results of the test have not been provided in the paper but are available with the author.