Mobile, fixed line and Internet service effects on global productive efficiency

Since the pioneering work of Hardy [Hardy Andrew P., 1980. The role of the telephone in economic development. Telecommunications Policy (December), 278–286], Saunders et al. [Saunders, R.J., Warford, J.J., Wellenius, B., 1983. Telecommunications and Economic Development. Published for the World Bank by Johns Hopkins University Press, Baltimore] and Leff [Leff, N.H., 1984. Externalities, information costs, and social benefit-cost analysis for economic development: an example from telecommunications. Economic Development and Cultural Change 32, 255–276], researchers have strived to measure the link between communication technologies and economic development. Waverman in his current [Waverman, L., Meschi, M., Fuss, M., 2005. The impact of telecoms on economic growth in developing countries. In Africa: The Impact of Mobile Phones, Vodafone Policy Paper Series, No. 2, March, pp. 10–24] and past [Röller, L., Waverman, L., 2001. Telecommunications infrastructure and economic development: a simultaneous approach. American Economic Review 74, 909–923] efforts has demonstrated the positive link between telecommunications infrastructure investments and economic growth. Jorgenson and Vu [Jorgenson, D., Vu, K., 2005. Information technology and the world economy. Scandinavian Journal of Economics (12), 631–650] explore a similar link. Our approach focuses explicitly on information networks and the effect they have on business transactions costs, information dissemination and organizational efficiency. Using a stochastic-frontier production function approach, we separate the factors responsible for determining frontier production for subsets of countries while simultaneously exploring the impact of communication networks and economic reform on economies below the frontier. We find institutional reforms and the growth in information networks appear to benefit the world as a whole, but particularly its poorest nations, by improving the efficiency of how these and other resources are used. Finally, only in Asia we find that education is an important factor in shifting the production frontier out. Our findings suggest that expanded communication networks work in conjunction with economic reforms to improve business and government relations.