Telecommunications and economic growth

In an emerging global economy the ability of the telecommunications sector to provide an internationally competitive network for transferring information has significant implications for trade and economic growth. Because of recent large world‐wide investments in telecommunications infrastructure, quantifying the impact of telecommunications in economic growth has received much attention. However, economic analysts, in the absence of investment data for many developing countries, adopt the International Telecommunications (ITU) practice of using main telephone lines to measure the stock of telecommunications capital. The accuracy of this proxy has not been subject to careful statistical scrutiny. This study develops a supply‐side growth model which employs teledensity and the share of telecommunications investment in national income as telecommunications capital proxies. Estimation results suggest a significant positive cross‐country relationship between telecommunications capital and economic growth, when using alternative measures of telecommunications capital.