03-Evolution.pptx

BM42232
Evolution and Socio-Economic Impact of
Technologies
Evolution
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Objectives & Topics
 Examine the evolution of ICT and its impact on economy and digitally-divided society.
 Compare developing and developed countries in preparation towards sustainable
development.
 Appraise the presence of information accumulation as a stimulant factor for economic
development.
 Explain the transformation of information to technology.
 Topics:
 Evolution: Evolution of ICT, Economic Development, and the Digitally-Divided Society
 IT and Economic Development in Developing Countries
 Socio Economic Influence on IT: The Case of California
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Evolution of ICT, Economic Development and Digitally-Divided Society
 Digital divide could bring about an income divide both within a country and between countries
 The more the uses of the Internet diffuse, the more the divide may introduce serious concerns
 Global information society achieves progress by the development of information and communication
technology
 ICT offers the global society several conveniences, such as communication measures among countries
and/or local areas, Web systems for businesses, online trading of securities, and distance learning.
 General-Purpose Technology (GPT) also has the qualities of compatibility and applicable innovation
 Encourages creation of new technologies based on its own core technology
 ICT has the qualities of compatibility and applicable innovation
 Creates applied technologies in many fields
 ICT can be regarded as GPT
 ICT could contribute to increasing the growth rate in developed countries
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 ICT investments includes two aspects – increase in demand and technological change in the supply side –
this contribution may not stem solely from innovations by ICT
 ICT perspectives:
 (1) development infrastructure,
 Provides the production factor and nurture human capital
 ICT is an infrastructure of economic development that is related to the supply side of economies, not
the demand side
 Developments of ICT provide new information, knowledge, and education to nurture high qualified
human capital
 (2) ICT as communication measures
 Related to demand side of the economy
 Reducing transactions costs by access to ICT
 Internet provides facilities of the network of information exchange that can promote businesses and
consumptions
 Endogenous growth theory: economic growth is driven by the accumulation of knowledge
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 Usage of internet and other ICT devices depends on where they reside because regional differences
exist with regard to the uses of the devices, such as Internet
 Uses of digital devices depend on incomes and areas of residence
 Digital divide, which causes the difference with regard to the uses of digital devices, may become an
issue in both the global and local society
 Difference in the availability of the Internet and/or broadband literacy by region, country, and/or
individual exists
 Disparity of information literacy and availability exists
 Society faces some challenges in accessing public and private services supplied through the internet
 Access to ICT products is important for development
 Computer skill is positively related to the level of human capital
 Openness of trade, high rates of investment, and low share of agriculture in GDP had a positive
relationship to computer use
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 Considerable gain in East Asia is due to openness in trading ICT products and through policy
cooperation
 Internet diffusion varies among different countries in the world
 Cost of infrastructure and personal computers is a burden for low-income countries
 People in low-income countries do not have easy access to PCs, the Internet, and/or broadband. This
condition creates a divide between people in the high- and low-income groups with regard to their
current income and their potential to earn higher incomes in the future.
 The average numbers of Internet hosts and users, and PC users in developing Asian and African
countries are very low; this is in conjunction with the fact that the per capita GDP of these countries is
also low.
 If the digital divide exists, it may create an income divide on a global scale
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 Higher the income, the greater the diffusion of the PC and the Internet
 For instance, advanced technologies such as ICT have a tendency to be more developed in a few
industrial countries. Thereafter, other developed and developing countries obtain those advanced
technologies, which subsequently results in high levels of growth in those countries, similar to the
leading industrial countries. This is known as the flying-geese pattern of development.
 If the pattern is applied at the current stage, the digital divide will be merely a transitory problem.
Therefore, there is no need for governments or industrial organizations to reach a solution to the
divide problem.
 The progress of PC and Internet usage might expand the gap in GDP further
 Because ICT has the distinct feature of progressing rapidly, some persons, companies, or countries will
be unable to keep pace with the progress pertaining to the usage and the developments. As a result,
the rapid progress may bring about an impoverishment in the case of a majority of people or countries.
If this scenario actualizes, the global economy will shrink.
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 Digital divide should be resolved through market mechanisms
 Market forces should drive the deployment of ICT. A competitive force will encourage technological
innovation, and the prices of information and communication will decrease for many people
 Public policy should be used to promote competition in the fields of Internet and communication, for
example, in order to promote universal access services and to liberalize the regulations of the Internet
and communications. Active competition causes redistribution between digitally divided people.
 Public policy is needed to:
 Promote the growth of the entire spectrum of ICT networks, equipment, and infrastructure
 Provide the networks in order to activate communication in the community
 Although the supply side is an important factor for growth in the long run, the demand side is a crucial
factor for economic stability in the short run. Both sides interact in each time definitively. Public
policies should promote the diffusion of communication methods of ICT in order to provide easy
access to them by many users, regardless of their income and/or regional differences
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 While cooperating internationally, developed countries should act as leaders to finance the ICT
infrastructures in developing countries in order to bridge the gap in the uses of digital devices. These
policies may improve digital circumstances not only in developing countries, but also in developed
countries through a global increase in the demand for digital devices
 From a macroeconomic point of view, the increase in the digital divide diminishes ICT investments and
delays the innovation of ICT
 Public policies of the government should provide the devices of ICT as social capital and infrastructure
 Digital divide exists between developed and developing countries
 International provision of the digital devices should be achieved through a cooperative effort between
developed countries and international organisations
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IT and Economic Development in Developing Countries
 Information technology production speeds up technological changes in only developed countries
 Using existing knowledge as input in the production of new knowledge, developed countries has
developed further
 Developing countries are still struggling with their sociopolitical and/or socioeconomic problems
 Technological gap between developed and developing countries is wide expanding
 Common problem in the developing world: lack of physical and human capital
 Change has happened since the beginning of the world. The difference in the change of the past with
that of the present is the dimension and the speed of change
 It is a well-known fact that the amount of knowledge that has been produced in the last 20 years is
twice the knowledge produced since the early years of the world
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 Rapid changes and globalization force countries to change their economic structures and the way their
developments work
 Although IT-based economic development takes place in developed countries in a modern and
knowledge based manner, the same situation does not really happen in underdeveloped and
developing countries.
 Indeed, one can state that the globalization arguments of developed countries with a high level of
economic development performance cause pressure on underdeveloped and developing countries,
especially in commercial, political, and cultural areas. In this sense, it cannot be accepted ethical and
rational to state that globalization increases worldwide competition and improves economic welfare in
all countries in order to make national businesses vulnerable and defenseless.
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 Developing countries need long-term policies to create sustainable development
 Basic necessities for the developing countries:
 The quality of labor should be increased.
 Physical capital should be increased.
 Natural resources should be efficiently used.
 Entrepreneurially talented people should be encouraged.
 Technological progress should be adopted.
 Harmonized development for developing countries is possible only if the above are considered
 Information technology and its related derivatives should be formed accordingly
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Concerns of Developing Countries
 Lower income levels
 Poverty
 Unbalanced distribution of income
 High population growth
 Problems in industrial sectors
 Low education levels
 Insufficient health services
 Economic Factors
 No economic development strategy
 Sectoral and regional distribution of investment
unbalanced
 Geographical restrictions on production
 Sectoral structure of the economy
 Unemployment
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 Political Factors
 Political structure of the country
 Restrictions on the quality of organizations
 Political preferences of the electorate (if any)
 Sociocultural Factors
 Education level
 Unequal opportunities for different regions or
groups
 Traditions and customs

Information Accumulation as a stimulant factor for economic development
 Change types:
 Positive change: called as economic development
 Negative change: called as economic crisis
 In order to analyze objectivity of an entity, the specific entity should keep its own structure. But, this is
not the case in this world
 Growth (increase in production and per capita income), innovation (new way of organizing an entity
so that it produces better solutions for the needs of the community), development (planned
behaviour affecting the quality of life; requires increase in income and better distribution of income;
efficient use of factors such as capital and labor), modernization (mental change as well as a change
in tools and equipment used in the production process) and technology (knowledge and information
produced to increase the effectiveness or productivity of inputs; mental effort that creates an increase
in the input-output ratio)
 Using these parameters, we could analyze the relationship between the past and future
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Information Accumulation as a stimulant factor for economic development
 Social and economic changes always happen with changes in information, technology and social values
 The most important factors that cause the structural changes in today’s world are technological
innovations, population growth, administrational changes, and mass-communication tools such as radio,
TV, and the Internet
 Developing countries face changes in the following in the process of economic development: The structure
of the economy; The production process; Technology; Mass-communication tools; Social roles and
positions; Education systems; Social values and customs; Culture and linguistics; Sexual behaviours and
customs; Family and relative relations; Populations growth rate; Religious organizations
 Factors that cause an increase in the life standards of developing countries: Socioeconomic infrastructure;
Education level; Technology level of the country; The quality and quantity of the entrepreneurs of the
country; Labor efficiency; The working environment; The renovation absorption capacity of the community
 Very crucial for the development of information technology infrastructure
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Transformation of Information to Technology
 What is the relationship among Human Capital, Technological Innovations, and Investment?
 Economic development is related to capital accumulation and the labor force
 Capital accumulation: implies the level of physical capital as well as human capital
 An increase in physical capital is not more important than an improvement in human capital for the
economic development process since technological improvements and innovations can only be
achieved by a certain level of human capital
 Physical capital: refers to machinery, buildings, equipment, etc that are used in the process of
production of finished goods from raw materials
 Human capital: refers to knowledge that a worker brings to the company in the manner of education,
talents, abilities, knowledge, preferences, etc. that they have gathered over time
 Human capital can be considered the main (if not the only) factor in economic development
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 The production of information hastens technological changes since a main input to produce a new
technology is previously created information
 Past information is an input for present information, and thus, it will also become an input for new
technology creation. This process creates diffusion, and diffusion is a dynamic process
 Diffusion can be felt only if there are a large number of skilled labour workers in the country
 Developing countries should focus on high-tech productions in order to become a developed country
 If a country don’t have capital accumulation, foreign investors move their capital into these countries
as long as the rate of return on capital is high enough and there is enough skilled labor for them to run
their businesses
 Technical capacity, in a broader sense, implies increases in the economic activities of the skilled labor
force over time, and this, of course, implies increases in human capital
 Economic development is also affected by local factors such as customs and traditions, demographic
and population structure, social capital
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 A country that is open to the world markets gains a more flexible and dynamic administrative
structure, and becomes more advantageous in world competition
 Developed countries give a very high level of importance to education as well as other areas related to
information technology
 For the developed countries, human capital and light infrastructural resources become two of the main
stimulants for economic development. A developed country with a low-ability labor force may find
itself in very deep problems
 Relationship between investments and innovations should be a continuous one. This continuous
relationship can be formed with human capital
 Stage 1: firms have R&D budgets. This encourages talented people to produce new ideas and
innovations, and thus makes their companies more powerful in the global world
 Stage 2: innovative progresses of the firms become the vision of the firms. Firm and innovation become
interrelated, and human capital is supporting and assuring the continuation of this relation
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 Stage 3: combined effects of human capital, innovations, and investment make both the firms and the
individuals better off, and thus life standards increase and economic developments take place. This last
stage has very unique characteristics. It is the last stage, but also it is the fundamental stage for
continued economic development. If the combined effects and relations of human capital, innovations,
and investments do not harmonically continue, economic development suddenly ceases.
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Importance of IT for economic development
 Technological change in the world affects people’s development abilities over time
 Some managers, technicians, and engineers become less and less useful due to the lack of ability in
adopting new techniques used in organizations
 Dynamic and synergistic regions are important for the agents who have innovative and creative
abilities
 Structural change in industrial communities need education, information, and technology
 This implies that higher technology and higher human capital is important for a society to progress
in economic and social development
 Creating and capturing information are not easy tasks themselves. The communities must internalize
and use the information.
 If the community does not have a legal and structural background, then creating information will be
only a sunk cost for the institutions. Developing countries must first create a structural adjustment in
their legal systems to hasten the information technology creation process.
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 When higher human capital combines with physical capital, the country can produce technology-
oriented products and create innovations
 For information technology to develop, more investment must be put to human capital, which is
basically, among other things, the education level
 Innovations always have higher-value-added opportunities for outputs produced
 Development is not only about value-added outputs but also about increase in community health, the
life expectancy of people, the number of live births, and so forth
 In developing countries, focus is given to education. But, children are working and contributing to
household budget instead of attending school
 Giving money to parents in low-education-level regions will make children to study instead of work
 Investments must be quickly on research centres, data banks, web systems, mobile communication
tools, computer related activities, etc because the source and variety of information changes very
quickly. Thus, making the best use of these investments requires very agile actions
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 Foreign investors might not be interested until administrative and legal procedures are in place in the
developing countries
 Instead of having small investments in different areas, there should be big amounts of investments in
certain areas so that when they develop, these sectors might create spill over in other sectors
 IT-related improvements bring new techniques to economic activities such as production,
consumption, and resource and income distribution. This causes efficiency increases. In other words,
IT-related developments create a stimulated impact in economic structure.
 As technology changes very fast, developing countries should renew the existing information faster.
Otherwise, old information they have will start depreciating and at the end, it may not produce enough
solutions for the continuing process of development
 Old information becomes useless in solving existing problems
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 The information age may cause some other problems like:
 If information is gathered and distributed by specific firms, there is the risk that the information
sector will have a monopolistic (oligopolistic) structure.
 Since it is very expensive to obtain information in developing countries, some people or groups may
become the information elite and solicit the remaining sectors.
 Critical information may be black-marketed if the copyright system of the country is not effective.
 Since there is an insufficient number of specialists, there may be some user-related errors.
 There may be misuse of information.
 Environment-related problems may arise due to technological progress.
 Physical and social problems may arise due to technological progress.
 The information age may bring a higher frequency of problems to developing countries.
 Monopolistic companies may exist due to information accumulation.
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Importance of Technological Advances in Economic Development
 Organization for Economic Cooperation and Development (OECD) countries could not reach a certain
level of economic growth within the last decade, and thus they did not invest in information
technology as they should have
 Some countries aware of the importance of the technological process, however, left government R&D
expenditures out of the budget cuts and also applied tax cuts for privately managed R&D expenditures
 Governments try to construct a good connection between publicly and privately owned R&D
companies so that they can share information amongst themselves
 Underdeveloped or developing countries are mostly struck in one of these stages and cannot pass to
the next stage
 While developed countries show a higher level of growth, developing countries show a lower level of
growth due to economic, social, and political reasons. This situation causes the gap between these
countries to become even bigger
 Developed countries have some common characteristics of their own: A higher education level; A
strong economic and institutional structure; Advanced technological progress; Military power; A
higher level of growth rate
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Importance of Technological Advances in Economic Development
 Internet use becomes higher or lower depending upon the economic development of the country
 Developing countries must allocate more and more resources for information technology and more
interaction with the world
 Human capital must be increased by allocating more and more resources for education and training
activities
 The faster the adaptation to the world, the faster the development will be for developing countries
 Developing countries should form institutional linkages as fast and as efficient as they can since these
linkages are a very fundamental portion of economic and social development
 Increasing production efficiency will be continued if and only if economic institutions are investing in
information technology and human capital
 R&D expenditures started decreasing in some developed countries in the last three decades due to
enough developments in communication and information technology, and to an increased level of
biotechnology and advanced equipment
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Socio Economic influence on IT: Case of California
 Influence of socio-economic factors on employment, payroll, and number of enterprises of three
technology sectors
 Important factors are: professional / scientific / technical services, educational services, ethnicity,
college education
 For companies to stay viable and competitive, adjusting to an ever-increasing pace of changes is a must
 The rapid development of new technologies in the information age and the unequal ability of societies
across various segments to adjust to and assimilate these constant changes has been recognized as a
source of problems for the old socio-economic structures because it creates potentially disruptive
frictions
 Having knowledge of what is there with no means of obtaining it or having technology but no
knowledge of how to use it does not constitute access
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 Digital divide:
 refers to inequality of individual and household access to the Internet
 Divide between those with access to new technologies and those without
 Wage divergence and inequality related to technological change
 Impact of Internet can be studied from three different perspectives – access, involvement, and
interaction
 Technology emphasizes the key factor of highly skilled workforce, both to perform technology tasks
and provide highly skilled support functions
 The basic assumption is that socio-economic factors, such as education, income, service sector
composition, ethnicity, federal funding, and population growth, are associated with the size of
technology receipts and payroll. It is evident that socio-economic factors and technology are frequently
intertwined and interrelated
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 A county with a high technology level may attract highly educated people; may create prosperity and
wealth in its citizenry; and may foster R&D
 To measure technological change, the dependent variables are employees per capita, payroll per
capita, and number of enterprises per capita
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 Benefits of information:
 1) they utilize computers and modern information communication technologies;
 2) they increase the productivity of institutions, shorten product life cycle, and reverse the
composition of our labor force from mainly blue-collar workers to predominantly service providers
and knowledge workers;
 3) they diminish the importance of distance and contribute to globalized markets and economies;
and
 4) they contribute nearly 60% to the American gross national product.
 The environment of discovery and science also is associated with a high concentration of technology
sectors in computers, information systems, communications, the Internet, and Web entertainment
 Not enough science and technology opportunities are present in K-12, and there is reduced incentive
and resultant low numbers of science and engineering majors and the college level
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 Factors that impact the influence of IT: Laws and regulations; profit-making versus societal interests of
technology firms; high-tech employment trends; venture capital investment; public and private
technology education; and cultural, sociological and behavioral factors that influence businesses and
their workers
 Socio economic characteristics influence consumer uses of technology
 Consumers with scientific and technology skills provide technology employees for businesses
 Changes in technology demand continuous skill upgrading in the work force
 Policy intervention must be targeted towards reducing the gap in social and economic factors since
studies have shown that a direct influence exists between specific socio-economic factors and the
dependent variables
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 Digital divide could be handled through:
 Promote and support science and high-end professions by investing in these segments of higher education and
in R&D.
 Invest in broadly-based education, training, and lifelong learning.
 Develop policies to market science and high-end professional career paths to K-12 and college students.
 Create educational incentives for students to enter those career paths.
 Shift the dependence on reducing the high-tech educational gap from foreign immigration to the state’s
education system and its outflows.
 Shift the focus of unemployment protection to skills upgrading and lifelong education.
 Increase awareness of the negative and exclusionary effects the digital divide has on individuals and society in
general and its possible subsequent results—unemployment, social unrest, and crime.
 Establish a comprehensive dialogue between different stakeholders in communities— government,
businesses, educational, institutions, citizens—to foster a unified approach to encourage science and
educational development and its benefit to all.
 Allocate resources more efficiently.
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 1. What are the most important socio-economic factors overall that influence the per capita economic
sizes of the information, information services/data processing, telecommunications/ broadcasting, and
motion picture/sound recording technology sectors for counties in California? [could be for other
countries as well]
 The most important factor is professional/scientific/technical (PST) workforce. The next factors in
importance are college graduates and educational services. Of minor importance are ethnicity (with
inconsistent directionality), federal grants and funds, and the very minor percent change in
population.
 2. How do these sectors differ with respect to the most important socio-economic factors that influence
their economic sizes?
 By sectors, the information sector is influenced by PST and education about equally. That sector shows
some positive effect from federal funds and grants, and minor inverse ethnic effects. IS-DP
(Information Systems-Data Processing) and B-T (Broadcasting-Telecommunications) are similar in
having a dominant PST effect, followed by lesser educational effects. There are specific, minor Latino
and Black ethnicity effects. For MP-SR (Motion Picture, Sound Recording), educational services and
college graduates dominate, with a minor percent population change effect. 32

Conclusion
 Impact of IT on Socio-economics
 Socio-economic influence on information technology
 Factors that contribute towards the impact are studied
 Digital divide and how it is taken care by technological improvements
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References
 Information Technology and Economic Development: CH I, II, XXII
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