Policy Reform, Economic Growth and the Digital Divide

Abstract

Rapid growth of internet use in high-income economies has raised the spectre of a “digital divide” that will marginalize developing countries because they can neither afford internet access nor use it effectively when it is available. Using a new cross-country data set, this paper investigates two proximate determinants of the digital divide: internet intensity (internet subscriptions per telephone mainline); and access to telecom services. Surprisingly, no gap in internet intensity was found. When differences in urbanization and competition policy are controlled for, low-income countries have intensities as high as those of industrial countries. While income does not seem to matter in this context, competition policy matters a great deal. Low-income countries with high World Bank ratings for competition policy have significantly higher internet intensities. The paper's finding on internet intensity implies that the digital divide is not really new, but reflects a persistent gap in the availability of mainline telephone services. After identifying mobile telephones as a promising new platform for internet access, the paper uses panel data to study the determinants of mobile telephone diffusion during the past decade. The results show that income explains part of the diffusion lag for the poor countries, but they also highlight the critical role of policy. Developing countries whose policies promote economic growth and private sector competition have experienced much more rapid diffusion of mobile phone service. Simulations based on the econometric results suggest that feasible reforms could sharply narrow the digital divide during the next decade for many countries in Africa, Asia and Latin America.

Penetration and Growth Rates of Mobile Phones in Developing Countries: An Analytical Classification

“…The above analysis draws attention to income as being the main common factor among the countries in the 'low-low' category. This finding is very much in line with crosscountry evidence on the role of income in explaining the variation in penetration rates of the Internet and mobile phones (Dewan et al 2004;Dasgupta et al 2002). From the point of view of penetration rates, one might then expect the countries in the opposite 'goodgood' category to have sharply higher income levels.…”

“…Econometrically this was already clear in 2002 from the study by Dasgupta et al which found that variations in penetration rates across countries had much to do with policy reform (and in particular with the liberalization of telecoms markets), as well as with variations in incomes 'Income remains a prime determinant of the digital divide, but our results suggest that appropriate economic and competition policies can sharply narrow the gap' (Dasgupta et al 2002).…”

Gaps and Bits: Conceptualizing Measurements for Digital Divide/s

“…Each of these may serve as a gauge of the gap. Among these mono-or single topics, the literature mentions the following: income (Ebo, 1998), occupation (Losh, 2004;McLaren & Zappalà, 2002), gender and age (DiMaggio et al, 2004), education (Cornfield & Rainie, 2003), geographic centrality (Chen et al, 2003;Cornfield et al, 2003), ethnicity and race (Hoffman et al, 1999;2000;Novak et al, 1997), religiosity (Bell et al, 2004), language (Foulger, 2001), family structure (Kennedy et al, 2003), physical capacity (Le Blanc, 2000;Lenhart et al, 2003), frequency (Fox, 2004), time online (Spooner & Rainie, 2001), purpose (Center for the Digital Future, 2004), skills (Robinson et al, 2003), autonomy (Dasgupta et al, 2002), affordability (OECD/DSTI, 2001), competitive market structure (Dutta & Jain, 2004), ownership and density of computers and web sites (Sicherl, 2003), and communication infrastructure (Horrigan & Rainie, 2004;Horrigan, 2004aHorrigan, , 2004bKatz et al, 2003;Wareham et al, 2004).…”

Diffusion Of The Internet : A Cross-Country Analysis

“…Measuring potential users is problematic since it requires access to micro data, which is unavailable for most of the countries in our sample. However, as noted by Dasgupta et al (2001), in the case of Internet, human capital requirements to use its basic applications (electronic mail and information search) are relatively low. Therefore, it seems reasonable to assume, as we do, that the entire population is a potential user.…”