Transcript The Developing Countries and The Challenge of the Digital

Dividends from the ‘New’ Economy:
Economic Impacts of ICT
Matti Pohjola
World Institute for Development Economics
Research (WIDER)
United Nations University
28 June 2001
1
Economic Impacts of ICT
1. A Definition of the New Economy
2. The Digital Divide
3. Ways to Benefit from the ICT Revolution
4. How Large Are the Dividends?
5. Policies for Bridging the Digital Divide
Pohjola, M. (ed), Information Technology, Productivity, and Economic
Growth, Oxford University Press 2001
Pohjola, M. (ed), The New Economy in Development (under
preparation)
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A Definition of the ‘New’ Economy
1) Globalization of business
– spreading of capitalism around the world (introduction
of markets, free trade, and deregulation)
2) Revolution in information technology
– decline in the costs of computing
– convergence in communication and computing
technologies through the digitization of information
– networking of computers via the Internet
– creation of new companies and industries
– restructuring of existing firms
1) + 2) =>
3) Acceleration of productivity and economic growth3
An Important Problem:
The Digital Divide
• 55 countries account for 99 % of all ICT spending
in the world
• The inequalities of access to the Internet exceed
the inequalities of income across the world
– In 1997, the richest fifth of countries had 86 % of world
GDP but 93 % of Internet users
– the poorest fifth had 1 % of GDP but 0.2 % of Internet
users
=> Income and wealth inequalities across countries
will increase if the new technology is the source of
new wealth
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Internet Host Density and GDP per
Capita, 1999-2000
Hosts per 1,000 people, January 2000
(log scale)
1000
100
10
1
0.1
0.01
0.001
0.0001
100
USA
FIN ISL
NOR
NZL SWE
CAN
AUS DNK
SGP
NLD
CHEAUT
ATG ISR
GBR BEL
LUX
EST
JPN
DEU
IRL
CZE
SVN CYP FRA
TTO HUN
ITA
ZAF
SVKGRCPRT ESP
LVA URY
POL MYS
ARGKOR
BLZ LTU
BRA MEX HRV BRB PYF
DMA
CRICHL
BGR
RUS BWAKNAMAC
TUR
GTMSWZ
VUT
PAN COL
MKD NAM
THA ROM
SLB KGZ JAM
NCL
PHL
FJI LCADOMMUS
MDA
PER
UKR
GRD
NIC ECU
BTN
PRYVCT
GEO
SLV KAZ
ZWE
JOR
IDNEGY
COM BOL HND
TKM
BLR
SEN
ZMB
LKA CHN
KEN HTI PAKIND
ALB
RWA
GUY
TZA
TGO
LSO AZE MAR
MDG
SAU
UGA
MRT
BFA
SLE
MNG UZB
TUN
NPL KHM
MOZ
GHA
WSM IRN
BGD
NER
BEN LAO
CPV
GAB
MLI ERI
CAF VNM
DZA
SYR
ETH NGA
CMR
BDI
TCD
MWI
GIN
1000
10000
100000
GDP per capita, 1999 (PPP, international $; log scale)
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The Number of People Online, Nov 2000
Africa
Asia/Pacific
Europe
South America
Middle East
North America
World total
Total number Estimated population
(million)
(million)
3.1
805.2
104.9
3517.4
113.1
728.9
16.5
346.5
2.4
170.7
167.1
307.0
407.1
6 080.0
Share of population
(per cent)
0.4
3.0
15.5
0.4
1.4
54.4
6.7
Source: Nua Ltd (2001) for people online; US Bureau of Census (2000) for the
population estimates
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Two Possible Ways to Benefit from the
ICT Revolution
• Becoming a producer of ICT
– in advanced industrial countries, the valued added of ICT
industries typically accounts for 4-6 % of GDP
– not a realistic option for most countries since the markets have
been preempted by big multinationals
• Becoming a user of ICT
– in advanced countries, the ratio of ICT spending to GDP is
typically between 6 to 10 %
– a realistic option for all countries
• In the long run, the benefits from ICT use are more
important than those from production for any country
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Average ICT spending to GDP ratios, 1992-99
Countries above average
New Zealand
Sweden
Australia
United States
United Kingdom
Switzerland
Canada
Singapore
Netherlands
Denmark
Japan
Hong Kong
Israel
South Africa
France
Czech Republic
Belgium
Norway
Finland
Ireland
Germany
Malaysia
Korea, Rep.
Austria
Chile
Hungary
Colombia
Source: WITSA (2000)
%
9.3
8.4
8.1
8.1
7.8
7.8
7.6
7.6
7.1
6.6
6.5
6.5
6.4
6.3
6.3
6.2
6.0
5.9
5.9
5.8
5.7
5.5
5.3
5.1
5.1
5.1
5.1
Countries below average
Slovak Republic
Portugal
Italy
Spain
Taiwan
Vietnam
Brazil
Venezuela
Greece
Mexico
Slovenia
Argentina
Saudi Arabia
China
Poland
Thailand
Bulgaria
Turkey
Philippines
India
Russia
Indonesia
Egypt
Romania
%
4.6
4.6
4.2
4.2
4.1
3.9
3.9
3.8
3.7
3.5
3.3
3.3
3.1
3.1
2.9
2.8
2.8
2.7
2.7
2.1
2.0
2.0
2.0
1.3
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Percentage of ICT spending in GDP,
average over 1992-99
ICT Spending and GDP per Capita
10
NZL
9
SWE
8
AUS
USA
7
ZAF
6
CZE
HUN
5
FIN
4
3
POL
RUS
2
ROM
1
0
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
GDP per capita 1999 (PPP, international dollars)
Source: WITSA (2000) and World Bank
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How Large Will the Dividend Be from
Becoming an Advanced ICT User?
1) Evidence from advanced countries in the late
1990s
2) Evidence from a cross-section of 49 countries in
1992-99
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Advanced countries in the late 1990s
• The contribution from ICT use to GDP growth: 0.3 -- 1.1
percentage points per year
%-points per year
1.2
1
0.8
0.6
0.4
0.2
an
y
er
m
G
Ita
ly
Ja
pa
n
Fr
an
ce
ra
lia
Au
st
Fi
nl
an
d
U
S
0
Sources: Jalava and Pohjola (2001), Oliner and Sichel (2000), OECD (2001)
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49 countries in 1992-99
Change in annual growth rate
(percentage points)
• increasing the share of ICT investment in GDP by 50 % (say
from 2 to 3 %) increases GDP growth rate by 2 percentage
points
• this would double the GDP/capita level in 35 years
-100
8
6
IRL
4
POL
2
0
-50
-2 0
VEN-4
-6
RUS
-8
CHN
VNM
50
COL
100
Change in ICT investment to GDP ratio
(per cent)
Source: Pohjola (2001)
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Policies for Bridging the Digital Divide
• Promoting the use of ICT
– providing access to ICT is not enough, participation of
citizens should be encouraged
– put government online to improve services and give
citizens better access
– lower taxes and tariffs on ICT products
• Developing national capabilities
– invest in basic education and infrastructure
– promote competition in telecommunications
• the cost of access to the Internet is the most important factor in
explaining the diffusion of the Internet across countries
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