ICT and Economic Growth in East African Countries: A Panel Data Approach

Abstract

This paper empirically investigates the impact of telecommunications infrastructure in East Africa. The researcher uses the International Telecommunication Union, UN and World Bank data and applies the instrumental variable-generalized method of moments to a panel of 19 countries over the period 2000-2015. Whether telecommunication investment contributes or not to economic growth has been at the center of literature debate over time with varying empirical evidences for developed and developing nation. The effect of telecom market privatization has been controlled through independent panels. The results show that the telecom index composed of the Internet, mobile cellular and fixed line has contributed to economic growth. A one percentage point increase in this telecom index usage raises real per capita growth by 0.02 for the panel of whole countries. The result is more than this for countries that privatized their telecom sector and less for those that failed to privatize. Overall, the results suggest that the expansion of telecommunications infrastructure fosters economic growth in East Africa. With much room for potential growth enhancement of telecommunications infrastructure, policies to expand access to telecom services should be strongly encouraged by respective governments in general and privatization of telecommunication remained under government control in particular is desired.

DOI: 10.7176/JIEA/9-7-01

Publication date: December 31^st 2019