Information and Communication Technologies for Development and Poverty Reduction
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The document discusses the potential for information and communication technologies (ICTs) to reduce poverty. It aims to provide a framework for understanding the role of ICTs through analyzing their impacts at various levels. The document examines results from macro-level studies that find a positive relationship between telecommunications infrastructure and economic growth. It also explores the micro-level impacts of ICTs on households and small businesses, finding that ICT access can increase welfare and consumption. Additionally, the document discusses how ICTs may help deliver important public services to the poor more effectively.
Information and Communication Technologies for Development and Poverty Reduction
- 1. Information and Communication Technologies for Development and Poverty Reduction The Potential of Telecommunications Edited by Maximo Torero Joachim von Braun
- 2. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 2
- 3. 1. Motivation ICT brings with it high hopes of positive outcomes in developing countries Strong inequality still remains in the use and access of ICTs In absolute terms developing countries are still well behind the developed world in access to ICTs Rapid growth in developing countries- partially a result of low initial access INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 3
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- 5. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 5
- 6. 2. Main Goal Provide framework for policy dialogue towards better understanding of the role of ICTs INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 6
- 7. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 7
- 8. 3. What are the potential impacts of rural telephony? INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 8
- 9. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 9
- 10. 4. Five Questions What link exists between ICT growth and economic growth? Do weak institutions block effective use of ICTs? Have ICTs been adapted to low-income countries, and have they had an impact on SMEs? Does household access to ICTs remain constrained? Can ICTs play a role in providing pro-poor public goods and services? INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 10
- 11. 4.1. To answer the five questions: Driving Supply (Penentration) Demand Impact Forces and Institutional (Utilization) Designs Impact at the Global Level Chapter 3 Chapter 5 Infrastructure- Provision of Service Public, Private & International Households Organizations Content Chapter 4 Impact at the Microeconomic Level Chapter 6 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 11 Chapter 2
- 12. 4.2. Where did we measure impacts? U z b e k is t a n C h in a B a n g la d e s h J a m a ic a In d ia L a o s V ie tn a m U ganda G hana Kenya T a n z a n ia P e ru INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 12
- 13. 4.2. How did we select countries? Main Telephones and GDP per Capita, 2000 (138 countries) 60000 GDP per Capita (1995 US$) 50000 United States 40000 30000 Japan 20000 10000 Peru Jamaica India China Lao P.D.R. 0 Tanzania Uganda Bangladesh 0 10 20 30 40 50 60 70 80 Main Telephone Lines per '00' Inhabitants INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 13
- 14. 4.3. How do we measure the impacts? Macro level models to measure impact over growth At the household or SME level: • Models of Access • Matching and Difference in Difference estimates • Compensating Valuation • Willingness to Pay INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 14
- 15. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 15
- 16. 5. Results at the Macro Level • Tele-density positively associated with growth and investment • Telecom infrastructure appears to boost investment by reducing uncertainty associated with monetary shocks (e.g. Norton, 1992) • Impact of tele-density on growth is restricted to developed countries (Roller and Waverman, 1996) • Minimum threshold of telecom density (around 24 percent) required for positive growth effects INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 16
- 17. 5. Results at the Macro Level (ctd): • Results for fix phones (Torero, Chowdhury and Bedi;2004): – Estimates based on 118 countries – Positive causal relationship between telecommunications infrastructure and GDP. – 1 % increase in the telecommunications penetration rate 0.03% increase in GDP. – Nonlinear effect of telecommunications infrastructure on economic output. – Particularly pronounced impact for middle- income countries INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 17
- 18. 5. Results at the Macro Level (ctd): • Results of Waverman, Meschi and Fuss (2004): – All else equal, in the “low income” sample, a country with an average of 10 more mobile phones for every 100 people would have enjoyed a per capita GDP growth higher by 0.59 percent. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 18
- 19. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 19
- 20. 6. Institutions and ICTs Importance of specific characteristics of ICTs: • High fix cost and low marginal cost • Complementarities • Network externalities • Pervasive INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 20
- 21. 6. Institutions and ICTs (ctd) • Natural Monopoly versus Access pricing • Natural Monopoly framework implies that a multi- firm industry is inefficient due to a less than optimal scale of production • Access pricing seems to be the answer but this requires initial infrastructure, or what we call minimum critical mass INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 21
- 22. 6. Institutions and ICTs (ctd): Model of network expansion and breakdown Dollars Average Cost Utility Network Size n1 n2 n3 n Critical Private Exit mass point Optimum Point Growth by Self-sustained Entitlement growth Growth by external growth (directed growth) external subsidy subsidy Source: Noam (2001) INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 22
- 23. 6.1. Institutions and ICTs: Some Results Service shortfalls in some rural and peri-urban areas can be solved without government subsidies • regulatory reforms are needed to let the market work well But even in well-working markets service will not be commercially viable in some peri-urban areas and in most rural areas • subsidies may be justified to extend services beyond the market INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 23
- 24. 6.2. Institutions and ICTs: Specific Recommendations • Recommend regulatory changes to enable the market to work better • increased competition • open to new technologies • open to new business models • Outline an approach to subsidies to extend services beyond the market • using market forces • minimal regulation INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 24
- 25. 6.3 How to do it • Distinguish two types of urban service shortfalls: • market efficiency gap • real access gap • For the market efficiency gap: • identify current regulatory problems and issues that Ethiopia regulatory agency can address • examine new technologies that could help to reduce costs • For the real access gap: • draw on best practices developed in rural areas • complement and extend these for application in urban and peri- urban areas INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 25
- 26. 6.3. How to do it (ctd) INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 26
- 27. 6.4. Real Access Gap: What best practices tell us • Reliance on market forces: • Bottom-up identification of demand • Competition for the market • Subsidies allocated through the market • Minimal regulation: • Freedom of business and technical choice • Attractive licenses designed to encourage growth • Limited price controls • Cost-reflective access charges INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 27
- 28. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 28
- 29. 7. Results at the Micro Level ICT may contribute to poverty alleviation through: • Making markets more accessible to both households and small enterprises • Improving the quality of the public goods provision • Improving quality of human resources • More effective utilization of existing social networks • New institutional arrangements to strengthen the rights and powers of poor people and communities INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 29
- 30. 7.1 Results at the Micro Level: Firms • Early literature: limited evidence of productivity effects (e.g. Berndt (1990), Loveman, (1994) .Productivity paradox • More recent (after 1987) and more accurate data, Brynjolfsson and Hitt (1996): substantial returns to investments in computers (48 percent) • Difficult to measure, learning period, time lags INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 30
- 31. 7.1. Micro Level results: SMEs in India and Laos India Laos -Majority of businesses use fixed -Telephone widely used as telephone, fax and computers primary means of information gathering by rural businesses, - PC and the Internet are and demand is high underutilized -Little evidence on the positive -Firm size, location of market, impact of telephone use on firm and availability are important performance determinants of adoption -Positive relationship between ICT use and some performance indicators. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 31
- 32. 7.2 Results at the Micro Level: Households • Information is an indispensable ingredient in decision making for livelihood of households • Potential gains for rural households: • time and cost saving • more and better information, leading to better decisions • greater efficiency, productivity, and diversity • lower input costs and higher output prices • expanded market reach • Previous work trying to measure the consumer surplus: Saunder et al. 1983, Bresnahan, 1986, Saunders, Warford and Wellenius 1994, etc. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 32
- 33. 7.2. Results at the Micro Level Households in Bangladesh, Peru and Laos Bangladesh and Peru Laos -Compared to alternatives, positive direct -Telephone increase consumption monetary gain of the use of rural telephones. - Per capita consumption increase in - Estimated gains in welfare with respect to approximately 22% and 24% in per alternatives are: capita cash based consumption. Bangladesh: US$ 0.11 to 1.59 per call Peru: US$ 1.62 to 2.91 per call -Changes in telephone use between 2000 and 2001 - positive impact on -Rural households willing to pay more than changes in consumption in the same the prevailing tariff rates per local call: period Bangladesh: US$ 0.10 to 0.26 Peru: US$ 0.25 to 0.35 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 33
- 34. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 34
- 35. 8. Role of ICTs in providing pro-poor public goods • ICTs can be a powerful tool for improving the quality and efficiency of government social services. • Clear gap between the use of ICTs for the delivery of public goods. • Most of the cases of use of ICT in delivering public services are isolated. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 35
- 36. 8. Role of ICTs in providing pro-poor public goods (ctd) • Cross country analysis indicates that telecommunications investment may well be associated with improved health status. • A simple linear cross-country regression of the growth rate of fixed phone lines explains about 11% of the growth rate variance for life expectancy. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 36
- 37. 8. Role of ICTs in providing pro-poor public goods: some examples of impact • On farming technologies: • giving information in the best farming technologies and price changes in 30,000 villages across six states in India • On health: • telemedicine centers in Alto Amazonas, and in Andhra Pradesh, India, • HealthNet • ProCAARE discussion forum and the WorldSpace Foundation (WSF)-Africare HIV/AIDS initiative • On education: • education as the African Virtual University • the distance learning university in India INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 37
- 38. Outline 1. Motivation 2. Main Goal 3. Impacts of Rural Telephony 4. Five main questions 5. Results at the Macro Level 6. Institutions and ICTs 7. Results at the household and firm level 8. Role of ICTs in providing pro-poor public goods and services 9. Final Comments INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 38
- 39. 9. Final Comments • ICTs- not a panacea • ICTs can have an important impact at the macro level once a critical mass is achieved. • ICTs can have an important impact in linking smallholders and SMEs to markets • Need to differentiate market efficiency gap from real access gap • Government should play a major role in the real access gap. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 39
- 40. 9. Final Comments (ctd.) • Minimal conditions necessary for success: • prompt deregulation • effective competition among service providers • free movement and adoption of technologies • targeted and competitive subsidies to reduce access gap • institutional arrangements to increase the use of ICTs in the provision of public goods. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 40
- 41. 9. Final Comments (ctd.) • Two important things to keep in mind: • Three C’s of ICTs: Connectivity, Capability to use it, and Content. The latter is crucial specially to link to markets. • We need to look to new technologies: wireless broadband technologies potentially offer a future platform for delivery of voice telephony and broadband services to peri-urban and rural areas (leap-frogging). INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 41
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