Impacts of Public Telecommunications Policy on Industrial Geography and Welfare

Abstract

We include a clear distinction between transport and telecommunication infrastructures. We assume that public expenditure enables Information Technology Enabled Services to be traded abroad without the use of traditional transport modes. We show that the increase in the knowledge spillovers mainly related to mobile human capital and trade of services can develop industrialization in developing country, leading to less spatial inequalities. This latter must invest more in telecommunication than in transportation infrastructures to attract both industrial and knowledge activities. The welfare level will be improved for skilled workers in both countries when public policy decreases the cost of trading knowledge.