The Internet as a determining factor in economic convergence across countries
Abstract
This paper examines whether the Internet is a determining factor in explaining economic growth and convergence across countries when it acts as a channel of information and knowledge diffusion. Literature has identified around 140 possible growth factors, therefore given the contradictory results obtained from previous empirical studies it is crucial we understand the actual role of the Internet. Using the conditional convergence theory and a Bayesian panel data model averaging method from a sample of 100 countries between 1994 and 2017, our results demonstrate that an increase in access to the Internet is a non-determinant factor in economic convergence, being its probability of inclusion in the true growth model conditioned by the regressors included in the estimates and the time span analysed.
First published online 25 November 2021
Keyword : conditional convergence, economic growth, internet, Bayesian panel data
How to Cite
Perez-Trujillo, M., Lufin, M., & Lacalle-Calderon, M. (2022). The Internet as a determining factor in economic convergence across countries. Technological and Economic Development of Economy, 28(2), 313–336. https://doi.org/10.3846/tede.2021.15858
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Barro, R. J., & Sala-i-Martin, X. (2004). Economic growth (2nd ed.). The MIT Press.
Baumol, W. J. (1986). Productivity growth, convergence, and welfare: What the long-run data show. The American Economic Review, 76(5), 1072–1085.
Benoit, E. (1978). Growth and defense in developing countries. Economic Development and Cultural Change, 26(2), 271–280. https://doi.org/10.1086/451015
Bertschek, I., Briglauer, W., Hüschelrath, K., Kauf, B., & Niebel, T. (2015). The economic impacts of broadband internet: A survey. Review of Network Economics, 14(4), 201–227. https://doi.org/10.1515/rne-2016-0032
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel-data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
Bollou, F., & Ngwenyama, O. (2008). Are ICT investments paying off in Africa? An analysis of total factor productivity in six West African coun-tries from 1995 to 2002. Information Technology for Development, 14(4), 294–307. https://doi.org/10.1002/itdj.20089
Cardona, M., Kretschmer, T., & Strobel, T. (2013). ICT and productivity: Conclusions from the empirical literature. Information Economics and Policy, 25(3), 109–125. https://doi.org/10.1016/j.infoecopol.2012.12.002
Caselli, F., & Coleman, W. J. (2001). Cross-country technology diffusion: The case of computers. The American Economic Review, 91(2), 328–335. https://doi.org/10.1257/aer.91.2.328
Choi, C., & Yi, M. H. (2009). The effect of the Internet on economic growth: Evidence from cross-country panel data. Economics Letters, 105(1), 39–41. https://doi.org/10.1016/j.econlet.2009.03.028
Choi, C., & Yi, M. H. (2018). The Internet, R&D expenditure and economic growth. Applied Economics Letters, 25(4), 264–267. https://doi.org/10.1080/13504851.2017.1316819
Cortright, J. (2001). New growth theory, technology and learning. (Reviews of economic development literature and practice No. 4). U.S. Eco-nomic Development Administration, Portland (US).
Dasgupta, S., Lall, S., & Wheeler, D. (2005). Policy reform, economic growth, and the digital divide. Oxford Development Studies, 33(2), 229–243. https://doi.org/10.1080/13600810500137889
Dedrick, J., Kraemer, K. L., & Shih, E. (2013). Information technology and productivity in developed and developing countries. Journal of Man-agement Information Systems, 30(1), 97–122. https://doi.org/10.2753/MIS0742-1222300103
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Dowrick, S., & Rogers, M. (2002). Classical and technological convergence: Beyond the Solow-Swan growth model. Oxford Economic Papers, 54(3), 369–385. https://doi.org/10.1093/oep/54.3.369
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Feenstra, R. C., Inklaar, R., & Timmer, M. P. (2015). The next generation of the Penn World Table. American Economic Review, 105(10), 3150–3182. https://doi.org/10.1257/aer.20130954
Haini, H. (2019). Internet penetration, human capital and economic growth in the ASEAN economies: Evidence from a translog production func-tion. Applied Economics Letters, 26(21), 1774–1778. https://doi.org/10.1080/13504851.2019.1597250
Harris, R., & Yan, J. (2019). The measurement of absorptive capacity from an economic perspective: Definition, measurement and importance. Journal of Economic Survey, 33(3), 729–756. https://doi.org/10.1111/joes.12296
Kass, R. E., & Raftery, A. E. (1995). Bayes factors. Journal of the American Statistical Association, 90(430), 773–795. https://doi.org/10.1080/01621459.1995.10476572
Kraay, A. (2015). Weak instruments in growth regressions implications for recent cross-country evidence on inequality and growth (Policy Re-search Working Paper 7494). Washington, D.C. https://doi.org/10.1596/1813-9450-7494
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1999). The quality of government. The Journal of Law, Economics, and Organiza-tion, 15(1), 222–279. https://doi.org/10.1093/jleo/15.1.222
León-González, R., & Montolio, D. (2015). Endogeneity and panel data in growth regressions: A Bayesian model averaging approach. Journal of Macroeconomics, 46, 23–39. https://doi.org/10.1016/j.jmacro.2015.07.003
Leon-Gonzalez, R., & Vinayagathasan, T. (2015). Robust determinants of growth in Asian developing economies: A Bayesian panel data model averaging approach. Journal of Asian Economics, 36, 34–46. https://doi.org/10.1016/j.asieco.2014.12.001
Li, R., & Shiu, A. (2012). Internet diffusion in China: A dynamic panel data analysis. Telecommunications Policy, 36(10–11), 872–887. https://doi.org/10.1016/j.telpol.2012.06.004
Lundvall, B. Å., Vang, J., & Joseph, K. J. (2009). Innovation system research and developing countries. In B. Å. Lundvall, K. J. Joseph, C. Chaminade, & J. Vang (Eds.), Handbook of innovation systems and developing countries: Building domestic capabilities in a global setting (pp. 1–32). Edward Elgar Publishing. https://doi.org/10.4337/9781849803427
Lundvall, B. Å. (2017). The learning economy and the economics of hope. Anthem Press. https://doi.org/10.26530/OAPEN_626406
Madon, S. (2000). The Internet and socio‐economic development: Exploring the interaction. Information Technology & People, 13(2), 85–101. https://doi.org/10.1108/09593840010339835
Mankiw, N. G., Romer, D., & Weil, D. A. (1992). Contribution to the empirics of economic growth. The Quarterly Journal of Economics, 107(2), 407–437. https://doi.org/10.2307/2118477
Maurseth, P. B. (2018). The effect of the Internet on economic growth: Counter-evidence from cross-country panel data. Economics Letters, 172, 74–77. https://doi.org/10.1016/j.econlet.2018.08.034
Moral-Benito, E. (2012). Determinants of economic growth: A Bayesian panel data approach. The Review of Economics and Statistics, 94(2), 566–579. https://doi.org/10.1162/REST_a_00154
Moral-Benito, E., Allison, P., & Williams, R. (2019). Dynamic panel data modelling using maximum likelihood: An alternative to Arellano-Bond. Applied Economics, 51(20), 2221–2232. https://doi.org/10.1080/00036846.2018.1540854
Myovella, G., Karacuka, M., & Haucap, J. (2020). Digitalization and economic growth: A comparative analysis of Sub-Saharan Africa and OECD economies. Telecommunications Policy, 44(2), 101856. https://doi.org/10.1016/j.telpol.2019.101856
Niebel, T. (2018). ICT and economic growth – Comparing developing, emerging and developed countries. World Development, 104, 197–211. https://doi.org/10.1016/j.worlddev.2017.11.024
OECD. (2016). Economic and social benefits of internet openness. Directorate for Science, Technology and Innovation Committee on Digital Eco-nomic Policy.
Oyelaran-Oyeyinka, B., & Lal, K. (2005). Internet diffusion in sub-Saharan Africa: A cross-country analysis. Telecommunications Policy, 29(7), 507–527. https://doi.org/10.1016/j.telpol.2005.05.002
Papaioannou, S. K., & Dimelis, S. P. (2007). Information technology as a factor of economic development: Evidence from developed and develop-ing countries. Economics of Innovation and New Technology, 16(3), 179–194. https://doi.org/10.1080/10438590600661889
Pélissié du Rausas, M., Manyika, J., Hazan, E., Bughin, J., Chui, M., & Said, R. (2011). Internet matters: The Net’s sweeping impact on growth, jobs and prosperity. McKinsey Global Institute, New York.
Peren Arin, K., & Braunfels, E. (2018). The resource curse revisited: A Bayesian model averaging approach. Energy Economics, 70, 170–178. https://doi.org/10.1016/j.eneco.2017.12.033
Romer, D. (2006). Advanced macroeconomics (3rd ed.). McGraw-Hill.
Romer, P. M. (1987). Growth based on increasing returns due to specialization. The American Economic Review, 77(2), 56–62.
Röller, H., & Waverman, L. (2001). Telecommunications infrastructure and economic development: A simultaneous approach. American Economic Review, 91(4), 909–923. https://doi.org/10.1257/aer.91.4.909
Salahuddin, M., & Gow, J. (2016). The effects of Internet usage, financial development and trade openness on economic growth in South Africa: A time series analysis. Telematics and Informatics, 33(4), 1141–1154. https://doi.org/10.1016/j.tele.2015.11.006
Sala-i-Martin, X. (1995). The classical approach to convergence analysis (Center Discussion Paper No. 734). Yale University.
Sala-i-Martin, X. (1997). I just ran two million regressions. American Economic Review, 87(2), 178–183.
Sala-i-Martin, X., Doppelhofer, G., & Miller, R. (2004). Determinants of long-term growth: A Bayesian averaging of classical estimates (BACE) approach. American Economic Review, 94(4), 813–835. https://doi.org/10.1257/0002828042002570
Spar, D. L. (1999). The public face of cyberspace. In I. Kaul, I. Grunberg, & M. Stern (Eds.), Global public goods: International Cooperation in the 21st Century (pp. 344–362). United Nations Development Programme. Oxford University Press. https://doi.org/10.1093/0195130529.003.0017
Stanley, T. D., Doucouliaagos, H., & Steel, P. (2018). Does ICT generate economic growth? A meta-regression analysis. Journal of Economic Survey, 32(3), 705–726. https://doi.org/10.1111/joes.12211
Stiglitz, J. E. (1999). Knowledge as a global public good. In In I. Kaul, I. Grunberg, & M. Stern (Eds.), Global public goods: International Coop-eration in the 21st Century (pp. 308–325). United Nations Development Programme. Oxford University Press. https://doi.org/10.1093/0195130529.003.0015
Vu, K. M. (2019). The internet-growth link: An examination of studies with conflicting results and new evidence on the network effect. Telecom-munications Policy, 43(5), 474–483. https://doi.org/10.1016/j.telpol.2019.04.002
Vu, K. M., & Asongu, S. (2020). Backwardness advantage and economic growth in the information age: A cross-country empirical study. Tech-nological Forecasting and Social Change, 159, 120197. https://doi.org/10.1016/j.techfore.2020.120197
Vu, K. M., Hanafizadeh, P., & Bohlin, E. (2020). ICT as a driver of economic growth: A survey of the literature and directions for future research. Telecommunications Policy, 44(2), 101922. https://doi.org/10.1016/j.telpol.2020.101922
World Bank. (2018). World Development Indicators 2018. Oxford University Press. https://data.worldbank.org/indicator/IT.NET.USER.ZS
Appiah-Otoo, I., & Song, N. (2021). The impact of ICT on economic growth-Comparing rich and poor countries. Telecommunications Policy, 45(2), 102082. https://doi.org/10.1016/j.telpol.2020.102082
Arellano, M., & Bover, S. (1995). Another look at instrumental variables estimation of error-component models. Journal of Econometrics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D
Barro, R. J. (1996). Determinants of economic growth: A cross-country empirical study (NBER Working paper 5698). Massachusetts, CA. https://doi.org/10.3386/w5698
Barro, R. J. (2015). Convergence and modernization. The Economic Journal, 125(585), 911–942. https://doi.org/10.1111/ecoj.12247
Barro, R. J., & Sala-i-Martin, X. (2004). Economic growth (2nd ed.). The MIT Press.
Baumol, W. J. (1986). Productivity growth, convergence, and welfare: What the long-run data show. The American Economic Review, 76(5), 1072–1085.
Benoit, E. (1978). Growth and defense in developing countries. Economic Development and Cultural Change, 26(2), 271–280. https://doi.org/10.1086/451015
Bertschek, I., Briglauer, W., Hüschelrath, K., Kauf, B., & Niebel, T. (2015). The economic impacts of broadband internet: A survey. Review of Network Economics, 14(4), 201–227. https://doi.org/10.1515/rne-2016-0032
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel-data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
Bollou, F., & Ngwenyama, O. (2008). Are ICT investments paying off in Africa? An analysis of total factor productivity in six West African coun-tries from 1995 to 2002. Information Technology for Development, 14(4), 294–307. https://doi.org/10.1002/itdj.20089
Cardona, M., Kretschmer, T., & Strobel, T. (2013). ICT and productivity: Conclusions from the empirical literature. Information Economics and Policy, 25(3), 109–125. https://doi.org/10.1016/j.infoecopol.2012.12.002
Caselli, F., & Coleman, W. J. (2001). Cross-country technology diffusion: The case of computers. The American Economic Review, 91(2), 328–335. https://doi.org/10.1257/aer.91.2.328
Choi, C., & Yi, M. H. (2009). The effect of the Internet on economic growth: Evidence from cross-country panel data. Economics Letters, 105(1), 39–41. https://doi.org/10.1016/j.econlet.2009.03.028
Choi, C., & Yi, M. H. (2018). The Internet, R&D expenditure and economic growth. Applied Economics Letters, 25(4), 264–267. https://doi.org/10.1080/13504851.2017.1316819
Cortright, J. (2001). New growth theory, technology and learning. (Reviews of economic development literature and practice No. 4). U.S. Eco-nomic Development Administration, Portland (US).
Dasgupta, S., Lall, S., & Wheeler, D. (2005). Policy reform, economic growth, and the digital divide. Oxford Development Studies, 33(2), 229–243. https://doi.org/10.1080/13600810500137889
Dedrick, J., Kraemer, K. L., & Shih, E. (2013). Information technology and productivity in developed and developing countries. Journal of Man-agement Information Systems, 30(1), 97–122. https://doi.org/10.2753/MIS0742-1222300103
Desbordes, R., Koop, G., & Vicard, V. (2018). One size does not fill all… panel data: Bayesian model averaging and data poolability. Economic Modelling, 75, 364–376. https://doi.org/10.1016/j.econmod.2018.07.009
Dowrick, S., & Rogers, M. (2002). Classical and technological convergence: Beyond the Solow-Swan growth model. Oxford Economic Papers, 54(3), 369–385. https://doi.org/10.1093/oep/54.3.369
Eicher, T., Henn, C., & Papageorgiou, C. (2012). Trade creation and diversion revisited: Accounting for model uncertainty and natural trading part-ner effects. Journal of Applied Econometrics, 27(2), 296–321. https://doi.org/10.1002/jae.1198
Feenstra, R. C., Inklaar, R., & Timmer, M. P. (2015). The next generation of the Penn World Table. American Economic Review, 105(10), 3150–3182. https://doi.org/10.1257/aer.20130954
Haini, H. (2019). Internet penetration, human capital and economic growth in the ASEAN economies: Evidence from a translog production func-tion. Applied Economics Letters, 26(21), 1774–1778. https://doi.org/10.1080/13504851.2019.1597250
Harris, R., & Yan, J. (2019). The measurement of absorptive capacity from an economic perspective: Definition, measurement and importance. Journal of Economic Survey, 33(3), 729–756. https://doi.org/10.1111/joes.12296
Kass, R. E., & Raftery, A. E. (1995). Bayes factors. Journal of the American Statistical Association, 90(430), 773–795. https://doi.org/10.1080/01621459.1995.10476572
Kraay, A. (2015). Weak instruments in growth regressions implications for recent cross-country evidence on inequality and growth (Policy Re-search Working Paper 7494). Washington, D.C. https://doi.org/10.1596/1813-9450-7494
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1999). The quality of government. The Journal of Law, Economics, and Organiza-tion, 15(1), 222–279. https://doi.org/10.1093/jleo/15.1.222
León-González, R., & Montolio, D. (2015). Endogeneity and panel data in growth regressions: A Bayesian model averaging approach. Journal of Macroeconomics, 46, 23–39. https://doi.org/10.1016/j.jmacro.2015.07.003
Leon-Gonzalez, R., & Vinayagathasan, T. (2015). Robust determinants of growth in Asian developing economies: A Bayesian panel data model averaging approach. Journal of Asian Economics, 36, 34–46. https://doi.org/10.1016/j.asieco.2014.12.001
Li, R., & Shiu, A. (2012). Internet diffusion in China: A dynamic panel data analysis. Telecommunications Policy, 36(10–11), 872–887. https://doi.org/10.1016/j.telpol.2012.06.004
Lundvall, B. Å., Vang, J., & Joseph, K. J. (2009). Innovation system research and developing countries. In B. Å. Lundvall, K. J. Joseph, C. Chaminade, & J. Vang (Eds.), Handbook of innovation systems and developing countries: Building domestic capabilities in a global setting (pp. 1–32). Edward Elgar Publishing. https://doi.org/10.4337/9781849803427
Lundvall, B. Å. (2017). The learning economy and the economics of hope. Anthem Press. https://doi.org/10.26530/OAPEN_626406
Madon, S. (2000). The Internet and socio‐economic development: Exploring the interaction. Information Technology & People, 13(2), 85–101. https://doi.org/10.1108/09593840010339835
Mankiw, N. G., Romer, D., & Weil, D. A. (1992). Contribution to the empirics of economic growth. The Quarterly Journal of Economics, 107(2), 407–437. https://doi.org/10.2307/2118477
Maurseth, P. B. (2018). The effect of the Internet on economic growth: Counter-evidence from cross-country panel data. Economics Letters, 172, 74–77. https://doi.org/10.1016/j.econlet.2018.08.034
Moral-Benito, E. (2012). Determinants of economic growth: A Bayesian panel data approach. The Review of Economics and Statistics, 94(2), 566–579. https://doi.org/10.1162/REST_a_00154
Moral-Benito, E., Allison, P., & Williams, R. (2019). Dynamic panel data modelling using maximum likelihood: An alternative to Arellano-Bond. Applied Economics, 51(20), 2221–2232. https://doi.org/10.1080/00036846.2018.1540854
Myovella, G., Karacuka, M., & Haucap, J. (2020). Digitalization and economic growth: A comparative analysis of Sub-Saharan Africa and OECD economies. Telecommunications Policy, 44(2), 101856. https://doi.org/10.1016/j.telpol.2019.101856
Niebel, T. (2018). ICT and economic growth – Comparing developing, emerging and developed countries. World Development, 104, 197–211. https://doi.org/10.1016/j.worlddev.2017.11.024
OECD. (2016). Economic and social benefits of internet openness. Directorate for Science, Technology and Innovation Committee on Digital Eco-nomic Policy.
Oyelaran-Oyeyinka, B., & Lal, K. (2005). Internet diffusion in sub-Saharan Africa: A cross-country analysis. Telecommunications Policy, 29(7), 507–527. https://doi.org/10.1016/j.telpol.2005.05.002
Papaioannou, S. K., & Dimelis, S. P. (2007). Information technology as a factor of economic development: Evidence from developed and develop-ing countries. Economics of Innovation and New Technology, 16(3), 179–194. https://doi.org/10.1080/10438590600661889
Pélissié du Rausas, M., Manyika, J., Hazan, E., Bughin, J., Chui, M., & Said, R. (2011). Internet matters: The Net’s sweeping impact on growth, jobs and prosperity. McKinsey Global Institute, New York.
Peren Arin, K., & Braunfels, E. (2018). The resource curse revisited: A Bayesian model averaging approach. Energy Economics, 70, 170–178. https://doi.org/10.1016/j.eneco.2017.12.033
Romer, D. (2006). Advanced macroeconomics (3rd ed.). McGraw-Hill.
Romer, P. M. (1987). Growth based on increasing returns due to specialization. The American Economic Review, 77(2), 56–62.
Röller, H., & Waverman, L. (2001). Telecommunications infrastructure and economic development: A simultaneous approach. American Economic Review, 91(4), 909–923. https://doi.org/10.1257/aer.91.4.909
Salahuddin, M., & Gow, J. (2016). The effects of Internet usage, financial development and trade openness on economic growth in South Africa: A time series analysis. Telematics and Informatics, 33(4), 1141–1154. https://doi.org/10.1016/j.tele.2015.11.006
Sala-i-Martin, X. (1995). The classical approach to convergence analysis (Center Discussion Paper No. 734). Yale University.
Sala-i-Martin, X. (1997). I just ran two million regressions. American Economic Review, 87(2), 178–183.
Sala-i-Martin, X., Doppelhofer, G., & Miller, R. (2004). Determinants of long-term growth: A Bayesian averaging of classical estimates (BACE) approach. American Economic Review, 94(4), 813–835. https://doi.org/10.1257/0002828042002570
Spar, D. L. (1999). The public face of cyberspace. In I. Kaul, I. Grunberg, & M. Stern (Eds.), Global public goods: International Cooperation in the 21st Century (pp. 344–362). United Nations Development Programme. Oxford University Press. https://doi.org/10.1093/0195130529.003.0017
Stanley, T. D., Doucouliaagos, H., & Steel, P. (2018). Does ICT generate economic growth? A meta-regression analysis. Journal of Economic Survey, 32(3), 705–726. https://doi.org/10.1111/joes.12211
Stiglitz, J. E. (1999). Knowledge as a global public good. In In I. Kaul, I. Grunberg, & M. Stern (Eds.), Global public goods: International Coop-eration in the 21st Century (pp. 308–325). United Nations Development Programme. Oxford University Press. https://doi.org/10.1093/0195130529.003.0015
Vu, K. M. (2019). The internet-growth link: An examination of studies with conflicting results and new evidence on the network effect. Telecom-munications Policy, 43(5), 474–483. https://doi.org/10.1016/j.telpol.2019.04.002
Vu, K. M., & Asongu, S. (2020). Backwardness advantage and economic growth in the information age: A cross-country empirical study. Tech-nological Forecasting and Social Change, 159, 120197. https://doi.org/10.1016/j.techfore.2020.120197
Vu, K. M., Hanafizadeh, P., & Bohlin, E. (2020). ICT as a driver of economic growth: A survey of the literature and directions for future research. Telecommunications Policy, 44(2), 101922. https://doi.org/10.1016/j.telpol.2020.101922
World Bank. (2018). World Development Indicators 2018. Oxford University Press. https://data.worldbank.org/indicator/IT.NET.USER.ZS