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Does the digital gap matter? Estimating the impact of ICT on productivity in developing countries

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Abstract

Could the adoption of Information and Communication Technology (ICT) be the means to higher growth and productivity in developing countries? An alarming slump of global productivity growth rates, especially after the global financial crisis, underlines the relevance of this question which does not find a clear answer in the literature. What we do is to estimate the impact of ICT on total factor productivity using capacity and usage-based approaches. Latest panel data of 76 developing countries from 1991 to 2014 is entering our regression models. The results of the different approaches, which allow for unobserved country effects and non-linear relationships, are not optimistic: ICT is only a minor engine of TFP growth. Countries with relatively high ICT investment may be able to increase their TFP growth rates by between 0.1 and 0.3% annually relative to those with modest investment rates. That is, the digital gap matters, but reducing the digital gap alone is not enough to markedly increase growth rates.

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Notes

  1. Because of the transformation to change rates, we lose the first observation period. Developing countries are countries listed on the M49 list of the United Nations (1999).

  2. Hausman tests confirmed that the fixed rather than the random effects estimator is the best choice.

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Acknowledgements

We thank an anonymous referee for improving our paper. We would also like to thank discussants at the EBES 2019 conference in Coventry for valuable comments.

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Authors and Affiliations

  1. Butler University, Indianapolis, IN, 46208, USA

    Ronia Hawash

  2. Kuehne Logistics University, 20457, Hamburg, Germany

    Guenter Lang

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  1. Ronia Hawash
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Appendix

Appendix

See Table 5 here.

Table 5 List of Countries included
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Hawash, R., Lang, G. Does the digital gap matter? Estimating the impact of ICT on productivity in developing countries. Eurasian Econ Rev 10, 189–209 (2020). https://doi.org/10.1007/s40822-019-00133-1

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