Internet Use and Economic Development: Evidence and Policy Implications

This dissertation explores how Internet use impacts four different measures of economic development using several econometric techniques on multi-country panel data. The economic development outcomes investigated are: per capita GDP, per capita export revenues, per capita market capitalization, and societal well-being as measured by the United Nations Human Development Index (HDI). Data from the World Bank, the International Telecommunication Union, and the United Nations –covering 202 countries over the period 1996 to 2007– are combined to allow for empirical investigation using dynamic panel data and finite mixture model estimation techniques on the total sample and subsamples stratified by country income level. The results suggest that countries benefit differently from increasing Internet use and the magnitude of the effect depends on the income level of the country. In low-income countries, additional Internet use has a significant positive effect on per capita GDP and overall welfare, as measured by the HDI. Increasing Internet use has a significant positive effect on all four measures of economic development in countries that have achieved middle-income status. Since Internet use affects economic development outcomes differently depending on the income level of the country, the policy recommendations must also vary according to the country’s income level