Using data from developing countries, this paper examines the links between ICT diffusion and per capita income, trade and financial indicators, education, and freedom indicators. Internet hosts, Internet users, personal computers and mobile phones represent indicators of ICT. The Gompertz model of technology diffusion is used to study ICT dissemination. The results show that income and government trade policies influence ICT diffusion. However, freedom indices may or may not affect ICT diffusion. Moreover, only personal computers and Internet hosts seem to have a positive association with income. Contrary to expectations, ICT diffusion is not associated with education.
Many studies have emphasized that there is a catalyzing element in the use of ICT [14,33]. It is argued in these studies that the use of ICT leads to more effective economic reforms as it broadens and speeds access to information and knowledge that can result in greater participation of people in the events and processes that shape their lives . This may seem rather intuitive; a reduction in information asymmetry that enhances efficiency and access to knowledge for all would prevent one party from monopolizing opportunities for profit (gain) and at the same time allow participation of previously excluded groups.
However, the role of ICT in enhancing income and human development through reduction of barriers to knowledge and information asymmetries is yet to be empirically tested using data from developing countries. Some studies caution against the assumption that such linkages would indeed occur in the case of developing countries. For example, Avgerou [1] and Morales-Gomez and Melesse argue that the transfer of ICT to developing countries may not contribute to economic development the same way it did in industrial countries, and that it may be best to localize technology and focus on its use in education.
Thus, there are ambiguous conclusions concerning the link between ICT use and economic growth in developing countries. In addition, the issue of the direction of causality needs to be formally addressed. Did ICT endowed countries reach high-income levels as a result of higher use of these technologies or was ICT diffusion caused by higher economic growth?
This paper examines the relationship between ICT diffusion and a set of macroeconomic and policy variables for a sample of 47 developing countries. The countries are listed in Appendix I. More specifically, the paper explores the nature and direction of the links between ICT diffusion, and per capita income, trade and financial liberalization, literacy and education, and freedom indicators including economic freedom, civil liberties and political rights. The number of Internet hosts, Internet users, personal computers and mobile phones are used as alternate indicators of ICT. Following Kiiski and Pohjola [16], estimates of the Gompertz model of technology diffusion are generated using data on these four indicators as well as the set of macroeconomic and policy variables mentioned above.
The remainder of the paper is organized as follows. Section 2 describes the data and outlines the methodology employed in this study. In Section 3 the estimates of the determinants of ICT diffusion and the impact of ICT on selected economic and social development variables are discussed. Section 4 presents concluding comments.
2. Description of the data and methodology
Quah includes in the definition of the New Economy ICT, intellectual assets, electronic libraries and databases, and biotechnology (carbon-based libraries and databases). This paper focuses only on one aspect of the New Economy, namely ICT. Four ICT indicators are used, cellular mobile subscribers per 100 inhabitants, personal computers per 100 inhabitants, Internet host per 10,000 inhabitants, and Internet users per 10,000 inhabitants. 2 The data on these variables are for the period 1998-2000 and are taken from the website of the International Telecommunication Union . The first three variables may be viewed as indicators of the state of the ICT infrastructure, while the fourth indicator-Internet users-measures access to the Internet.