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STUDY FINDS INTERNET HAS LITTLE IMPACT ON ECONOMIES OF DEVELOPING NATIONS

Despite United Nations claims to the contrary, providing Internet access to developing countries does not significantly improve their economies or welfare, according to an Old Dominion University economist. Trisha Bezmen, who conducted a cross-country study of 85 countries between 1999 and 2000, found that the economic impact resulting from the introduction of this technology has been negligible.

Debate over whether funding Information and Communication Technology (ICT) is a successful development strategy has grown. According to United Nations Development Programme reports, "those nations that succeed in harnessing the potential of ICT can look forward to greatly expanded economic growth, dramatically improved human welfare and . . . an opportunity to meet vital development goals." Bezmen, assistant professor of economics, and Craig Depken II, associate professor of economics at the University of Texas-Arlington, question the legitimacy of blindly supporting such programs.

The researchers found that while an increase in Internet access does have a positive impact on a nation's level of gross domestic product (GDP), the impact is relatively small. Specifically, the pair found a 1 percent increase in Internet use corresponds to approximately a .33 percent increase in GDP. The response in African nations is a little stronger; a 1 percent increase in Internet users leads to an approximate 1 percent increase in GDP.

Bezmen and Depken caution against simply handing out computers to residents in developing countries. "Due to the lack of necessary infrastructure and required skills and abilities of users of such technology, direct transfers of
ICTs will not necessarily bring about increases in labor productivity and thus
will not guarantee that nations will experience economic growth," said Bezmen.

In their study, which is being reviewed by the journal Contemporary Economic Policy, the pair included a simple cost-benefit analysis of technology transfers to the average African nation and found that a technology transfer that increases the number of computers available by 1 percent leads to an estimated $10.84 million increase in national income. "On a per computer basis, such transfers are justifiable if the total cost per computer, including required infrastructure, training, software, accessories and more, is less than $4,170 each," said Bezmen.

"In short, while we find evidence that transfers of ICTs positively impact national levels of GDP, such policies may not be the most cost-effective means of attaining economic development, especially in the short run."

This article was posted on: March 9, 2004

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