1. Mobile Phones and Economic Development in Africa Jenny C. Aker & Isaac M. Mbiti Presented by Meredith Millard

2. About the Authors Jenny C. Aker - Assistant Professor of Economics at Tufts University - Deputy Regional Director in West and Central Africa (1998-2003) - Works on development in Africa focusing on information and technology in development outcomes Isaac M. Mbiti - Assistant Professor of Economics at SMU - Research in development, labor economics, and demography - Spoke at Baylor last spring for the Global Business Forum “Emerging Africa”

3. Sub-Saharan Africa - Contrasts to North Africa, viewed as part of the Arab World - estimated 800 million population -Roughly 9% of global population -Low levels of infrastructure investment - 29% of roads are paved -25% has stable access to electricity -3 landlines per 100 people -But mobile phone use is on the rise -10x as many mobile phones as landlines -60% of population has mobile phone coverage

4. Sub-Saharan Africa Angola Burundi DRC Rwanda Sao Tome Cameroon CAR Chad Equatorial Guinea Gabon Kenya Tanzania Uganda Djibouti Eritrea Ethiopia Somalia Botswana Comoros Lesotho Madagascar Malawi Mauritius Mozambique Namibia Seychelles South Africa Swaziland Zambia Zimbabwe Benin Mali Burkina Faso Cape Verde Cote d’Ivoire Gambia Ghana Guinea Guinea-Bissau Liberia Mauritania Niger Nigeria Senegal Sierra Leone Togo Republic of the Congo South Sudan (2011) Sudan (disputed)

5. Previous Literature Existing Literature Mobile Phones and Economic Benefits (Jensen, 2007; Aker, 2008; Aker, 2010; Klonner and Nolen, 2008) Mobile Phone Adoption Patterns (Ahmed, 2007; Baliamoune-Lutz, 2003; Kshetri and Chung, 2002; Donner, 2008) Gaps in Existing Literature Mobile phone adoption impact on macroeconomics and public goods

6. Methods & Research Previously Published Research - Previous literature - Private firms (Safaricom, M-Pesa, etc.) - Data Mining (GMSA, UN, World Bank, etc.)

10. Consequences of Mobile Phones for Economic Development in Africa Five Potential Mechanism

11. Mechanism #1 Mobile Phones can improve access to and use of information, reducing search costs, improving coordination among agents, and increasing market efficiency - Initial fixed cost of mobiles is significantly lower than equivalent transportation and opportunity cost - Mobile phones are more accessible than other communication alternatives in terms of cost, geographic coverage, and ease of use (compared to television, radio, newspapers, etc.) - Enables an active rather than passive role in search process - Limits waste in markets with highly-perishable commodities

12. Mechanism #2 Increased communication should improve firms’ productive efficiency by allowing them to better manage their supply chains.

13. Mechanism #3 Mobile phones create new jobs to address demand for mobile- related services, thereby providing income-generating opportunities in rural and urban areas. - Formal sector employment in the private transport and communication sector in Kenya rose by 130% between 2003-2007 (CCK, 2008) - Unmeasured informal sector employment

14. Mechanism #4 Mobile phones can facilitate communication among social networks in response to shocks, thereby reducing households’ exposure to risk - Natural disasters, political events, and violent conflicts

15. Mechanism #5 Mobile phone-based applications and development projects (m-development) have the potential to facilitate the delivery of financial, agricultural, health, and educational services - M-Banking: M-Pesa (begun in 2007) - $3.7 billion USD transferred by 2010 - Health practitioners - Election campaigns & monitoring - “Crowdsourcing” – increased transparency - Literacy Promotion – texting curriculum

17. Conclusions - Empirical evidence shows that mobile phones have the potential to benefit consumer and producer welfare and broaden economic development - The challenge is to ensure complementary access to public goods and the development of appropriate policies to evaluate and propagate the benefits of mobile phones throughout the continent

18. Criticisms - Endogeneity problems between mobile phones and economic growth (concerns may be addressed by using landline availability as a instrument for current mobile use) - Lack of credible research on proliferation of mobile use because some owners have several SIM cards and phones while other phones are used between several users Areas of Future Research - What is the macroeconomic effect of widespread mobile phone usage? - As a transformative development tool, what policies can increase mobile usage? - How can we obtain more reliable access data?

21. Comments & Questions