1. The Impact of Information and Communication Technologies on Economic Growth in Latin America in International Perspective Nauro F. Campos Centre for Economic Development and Institutions Brunel University, CEPR and IZA For presentation at the Digital Transformations in the Information Society Conference Geneva, June 2006

2. Brief Project Overview Part of a large research project trying to measure digital divide, focus on LAC United Nations Economic Commission for Latin America (all opinions are mine) Teams working on Growth Accounting Possible firm-level TICness indicators Here: macro impact of TIC (LAC vs. World)

3. Research Questions What is the impact of ICT on growth in LAC? Is this impact smaller in LAC than in other regions of the world (OECD, Asia, Eastern Europe, Africa)? Has the impact of ICT on Latin American growth changed since 1960?

4. Broadly Related Literature Evidence from labour economics, e.g. Dolton and Makepeace (EJ 2004) Evidence from firm-level studies, e.g. Brynjolfsson and Hitt (REStat 2003) Evidence from growth accounting, e.g. Jorgenson (Handbook Econ Growth 2005) Focus here is on TICs growth payoff using aggregate production function framework

5. Closely Related Literature 1963: Jipp, A., Wealth of Nations and Telephone Density, Telecomm Journal 1980: Hardy, A., The role of the telephone in economic development, Telecomm Policy 15 DCs + 45 LDCs, phones yes radios no, no effects on split samples 1991: Cronin et al., Telecommunications Infrastructure and Economic Growth: An Analysis of Causality, Telecomm Policy Feedback system (annual data)

6. Closely Related Recent Literature 2001: Röller and Waverman (AER) Reverse causality, OECD countries 2004: Sridhar and Sridhar (WIDER conf) Extend RW; find impact smaller in LDCs 2004: Teltscher and Korka (Infodensity ITU) 147 countries; ICT elasticity btw.1/.3 2005: Waverman, Mescchi and Fuss (TPRC conf) Impact of ICT on growth larger in LDCs

7. Lessons from Recent Literature What are desirable next steps? DATA: PANEL PANEL ESTIMATION ENDOGENEITY POOLABILITY ICT COMPOSITE and INSTITUTIONS

8. What have we done in this project? DATA: PANEL: put together extensive panel data set: 170 countries, 1960 to 2005 (5-year avgs), 42 ICT indicators ESTIMATION: exploit panel aspect, std & endogenous growth model (Islam, QJE 1995) ENDOGENEITY: exploratory Granger-causality POOLABILITY: supports runs by individual regions

9. Poolability issues 153 countries; 5-year averages since 1960 (9 periods max); 1110 observations Can we pool the data? Is the model for OECD the same as for Africa? Are the coefficients the same? The answer for our data is that you should NOT pool all data together… … but you can pool by region! OECD, LAC, MENA, Asia, Africa, TEs

10. Endogeneity concerns 150 countries; 5-year averages since 1960 Fixed and mobile penetration Granger-causality tests: coefficient [p-value] Fixed lines penetration Mobile lines penetration TIC to Growth?.001 [0.140].003 [.001] Growth to TIC?1.01 [0.540] -5.37 [0.462]

11. Baseline results (fixed-effects) (1)(2)(3)(4)(5) Capital0.132***0.140***-0.02010.165***-0.0254 [0.043] [0.039][0.042][0.039] Population-0.197***-0.175***-0.485***-0.144***-0.114*** [0.035][0.033] [0.032][0.025] Leg. Effectiveness-0.00215-0.00168-0.00044-0.00074-0.00031 [0.0022][0.0021][0.0016][0.0017][0.0015] OECD1.209***1.165***0.464**1.144***0.422** [0.22][0.20][0.19][0.20][0.18] Latin America-0.067-0.061-0.112-0.0589-0.105 [0.22][0.21][0.19][0.21][0.17] Asia-0.471*-0.504**-0.176-0.519**-0.173 [0.25][0.23][0.20][0.23][0.18] Transition-0.103-0.0879-0.312-0.0981-0.383** [0.24][0.23][0.21][0.23][0.19] Africa-1.402***-1.349***-0.593***-1.323***-0.541*** [0.22][0.21] [0.19]

12. Baseline results (cont) (1)(2)(3)(4)(5) Mobile penetration0.0209*** [0.0034] Fixed penetration0.351*** [0.023] Mobile per capita0.0923*** penetration[0.010] Fixed per capita0.371*** penetration[0.022] Constant10.67***10.31***11.71***9.768***9.779*** [0.65][0.60][0.52][0.60][0.47] Time dummies?Yes Observations1110 103511101035 Number of countries153 R-squared0.63280.65440.79720.66600.8155

13. Baseline results (LAC only) Mobile penetration0.0137** [0.0068] Fixed penetration0.362*** [0.051] Mobile pc penet0.101*** [0.037] Fixed pc penet0.356*** [0.050] Constant9.605***9.486***10.45***9.292***8.791*** [0.85][0.77][0.66][0.79][0.62] Time dummies?Yes Observations214 188214188 Number of countries24 R-squared0.09240.11390.63060.12290.6240

14. Summary of regression results Aggregate production model: OECD only fixed (>LAC) LAC fixed and mobile Asia fixed and mobile (>LAC) AFRICA fixed and mobile (<LAC) MENA only fixed TEs fixed and mobile (<LAC)

15. Endogenous growth model (1)(2)(3)(4)(5) Initial income-0.0114***-0.0133***-0.0185***-0.0115***-0.0186*** [0.0022][0.0023][0.0033][0.0022][0.0033] Capital0.0362***0.0366***0.0355***0.0364***0.0356*** [0.0043][0.0042][0.0047][0.0043][0.0047] Population-0.00069-0.0012-0.0061***-0.00064-0.0003 [0.00087][0.00088][0.0021][0.00085][0.00088] Human capital0.001830.00290*0.001290.002160.00128 [0.0015] [0.0018][0.0015][0.0018] Leg. Effectiveness0.000328**0.00035***0.000340**0.000333**0.000339** [0.00014] [0.00015][0.00014][0.00015] OECD0.0275***0.0259***0.0242***0.0269***0.0243*** [0.0072][0.0069] [0.0070][0.0069] Latin America0.003560.002510.001960.003270.00196 [0.0065][0.0064] Asia0.0174***0.0152**0.0176***0.0170***0.0176*** [0.0063][0.0061] Transition0.0229**0.0199**0.0218**0.0220**0.0219** [0.0097] [0.0093][0.0094] Africa-0.00662-0.00742-0.00312-0.0065-0.00319 [0.0068][0.0067][0.0069][0.0066][0.0069]

16. Endogenous growth model (cont) Mobile penetration0.00140*** [0.00031] Fixed penetration0.00580*** [0.0018] Mobile pc penet0.000552** [0.00089] Fixed pc penet0.00582*** [0.0018] Constant0.01240.03280.0924**0.01120.0657* [0.025][0.026][0.041][0.025][0.035] Time dummies?Yes Observations829 780829780 Number of countries105 R-squared0.36260.38160.39270.36470.3925

17. Summary of regression results Endogenous growth model: OECD weak for mobile LAC only fixed Asia only fixed (>LAC) AFRICA only mobile MENA only mobile

18. Conclusions ICT have large impact on growth even in the poorest countries Impact seems robust: different regions Impact seems robust: reverse causality

19. Extensions Institutions? Adequate investment climate, regulatory framework and economic reforms seem necessary to growth and will be incorporated An aggregate indicator of TICness

20. ICT Indicators Standard measures: fixed phone lines and mobile phone lines penetration A composite indicator capturing the multi-faceted nature of ICT is desirable An index of TICness?

21. TICness Index 140 countries; 3 points in time: 1990-1994, 1995-1999 and 2000-2004 Goal-post method, equal weights Six underlying variables: –mobile penetration (per capita) –import of telecom equip (%GDP) –outgoing international calls (per capita) –Internet hosts (per capita) –price of internet connection –high-technology exports (%GDP)

23. Thank you

24. Existing ICT Indicators ArCoDAIDOIEIUIKSKEINRIOrbicomTAIUNCTADUNPANWBICT Index Name Technolog y Capabilitie s for Countries Digital Access Index Digital Opportunity Index e-readiness ranking Index of Knowledge Societies Knowledge Economy Index Network Readiness Index Infostate Technology Achievemen t Index Index of ICT Diffusion E- Government Readiness Index ICT Index Publisher Archibugi & Coco ITU Economist Intelligence Unit (EIU) UN Department of Econ &Social Affairs World Bank Institute World Economic Forum OrbicomUNDPUNCTAD UN Division PAN World Bank Pub date2003Dec-032005April 20052005 March 2005200320012005Nov. 20042005 Countries16217840654512810413972165191144 Variables8811~10014805119811815 Subjective variables No Yes**NoYes* No Yes** No # publications 11161NA421231 Data year200020022003No mention 2003No mention20011995-200020022000-20022004 Historical comparisons 1990, 2000 1998 & 2002 for 40 countries No Previous year; index has been changed No 1995, latest data Previous year; index has changed Scores provided for 1996-2001 No Rankings for 1995, 1999-2002 Previous year; methodolog y changed between 1 and 2 publication No