how can you get more economic growth out of your ict? take care of your digital divide

How can you get more economic growth out of your ICT?Take care of your digital divide

Alain BOURDEAU de FONTENAYColumbia Institute for Tele-Information (CITI)

Fernando BELTRANUniversity of Auckland

ACORN/REDECOM Conference2009, Mexico City, 4-5 September 2009

04/20/23 05:30Alain BOURDEAU de FONTENAY ([email protected])

Fernando BELTRAN ([email protected]) 2

Objective A conceptual paper to help identify where to look, hence what are

the policy directions that need particular attention, hence the objective is to:

Provide an analytical framework within which the digital debate can be framed

Clarify the relevance of questions that are being raised Identify the questions that require:

Theoretical foundations Empirical testing

Understand what are likely constraints on digital divide policies Limitation: the paper

does not establish/only suggest concrete results where to look, hence likely policy directions



Outline Background to the digital divide debate ICT and economic growth Poverty

Questions What is the digital divide? Does the digital divide matters?

Why? Is the digital divide a matter of short or

long run policies? How are the digital divide and inequality

related?

04/20/23 05:30 4Alain BOURDEAU de FONTENAY ([email protected])

Fernando BELTRAN ([email protected])

What is the digital divide?A number of different frameworks, e.g., Technology (Goolsbee and Guryan 2006) Conventional commodity innovation (Mueller 2001) Internet usage (DiMaggio et al.; Noh and Yoo 2008) Economic competitiveness (Liu & San 2006) Social exclusion (NTIA 1995; Jung 2008) Social capital (Selwyn 2002)



ACORN/REDECOM, Mexico City04/20/23 05:30

Alain BOURDEAU de FONTENAY ([email protected]) Fernando BELTRAN

([email protected]) 6

Definitions NTIA: “The chief concern with respect to household computer and Internet

access is the growing digital divide. Groups that were already connected… are now far more connected, while those with lower rates have increased less quickly. As a result, the gap between the information ‘haves’ and ‘have nots’ is growing over time”

Fink and Kenny: “Four possible interpretations… [that] appear in the literature: 1.A gap in access to use of ICTs—crudely measured by the number and

spread of telephones or web-enabled computers, for instance. 2. A gap in the ability to use ICTs—measured by the skills base and the

presence of numerous complimentary assets. 3. A gap in actual use—the minutes of telecommunications for various

purposes, the number and time online of users, the number of Internet hosts, and the level of electronic commerce.

4. A gap in the impact of use—measured by financial and economic returns”



Definitions Keniston and Kumar’s (2003) four divides:

1. “The first divide is… between those who are rich, educated, and powerful, and those who are not…

2. A second digital divide… is linguistic and cultural… It separates those who speak English…

3. The third digital divide… is the gap between the rich and the poor nations…

4. … in countries like India and America, yet a fourth: the emergence of a new elite group,… the beneficiaries of the enormous successful information technology industry and the other knowledge-based sectors of the economy such as biotechnology and pharmacology….”



Definitions DiMaggio et al. (2004)

“inequalities in access to the Internet, extent of use, knowledge of search strategies, quality of technical connections and social support, ability to evaluate the quality of information, and diversity of uses”

Economic growth

2 different objectives: Economic efficiency Social equity

Implications of economic efficiency Economic growth International competitiveness



ICT and economic growth

2 views: Digital divide literature: ICT assumed to be

good for growth Empirical productivity literature:

ICT might have had a significant impact on the economy in the late 1990s (Stiroh 1998)

ICT’s impact primarily through price substitution (Jorgenson and Vu 2005)

Broad consensus: ICT’s impact is substantially less significant this decade (Jorgenson et al. 2008)





Inequality Question – What determines what?

Direct – what direction? Poverty/inequality => Growth Poverty/inequality <= Growth Poverty/inequality Growth

Indirect: Poverty = F(other factors = X) Growth = G(other factors = Y) How are X and Y related and how does it affect the

relationship between poverty/inequality and growth?

(Davis 2006)

Poverty and inequality Question: poverty/inequality?

Absolute poverty: trickle down effect Relative poverty Subjective poverty Inequality

Absolute poverty Long run: growth is good Short run: ambiguous Ambiguous:

Mostly absolute only in the short run (periodically revised) But subcategories such as food insecurity (Gundersen 2008)

Inequality More flexible than relative poverty Reflects better the behavioral impact of the evenness and fairness of

the income/wealth distribution



Multidimensionality of poverty Poverty is multidimensional

Food security (Gundersen 2008) Violence and security (Fay 2005; Aizer

2008) Socio-economic polarization (Mogues &

Carter 2005) …



Relative poverty, inequality, and growth?

Observation: inequality Decreased in the middle of XXth century Generally increased since the ‘70s

Increased inequality: Generally attributed to technological change, but why long

run? Some suggest ICT is a GPT

Very long time impact on labor force Skilled labor force is a complement Unskilled labor force a substitute Limited wage flexibility of low wage worker

Potentially: low skilled workers might become permanently unemployable



No inequality in a pure neoclassical environment



Corrective factors Competition optimizes efficiency given the

transfer requirements (Becker 1957) Knightian uncertainty (Knight 1921) Innovation (Schumpeter 1912) The response by the poor/minority:

Threat (Margo 1991) Assimilation (Bloch & Rao 2001)

Pressure toward power sharing (Alesina & LaFerrara 2005)

…



The impossibility of an efficient market-based allocation system



Why inequality is inefficient?

Poverty is undesirable, hence the haves have The incentives to restrict upward mobility-based

competition by the higher abilities have-nots. More resources to block competition due to their higher

wages, e.g., through being in a better position to: Manage information Manage the political process (Buchanan) Control the allocation of public resources (e.g., education,

security) Hence, a greater ability to achieve mobility foreclosure

(Chin & Wagner 2007; Cuellar 2007) Mobility limitations means tendencies toward

increases in chronic poverty



Population segmentation and mobility

Mobility foreclosure (hence inequality) strengthened where: Individuals are easily identifiable (Alesina et al. 1999) Easy identification facilitates discrimination (Phelps 1972) Discrimination controls mobility

Disproportionate representation among the poor Many racial and ethnic minorities (Kijima 2006) Women

Hence, easy identification facilitates mobility foreclosure through discrimination For instance, Eliza in Shaw’s 1913 Pygmalion (My Fair Lady) Easier identification facilitates mobility foreclosure (Quillian 2003)

Discrimination is self-enforcing Statistical discrimination (Phelps 1972; Altonji and Pierret 2001) Implicit discrimination (Bertrand et al. 2005) Network effects (Lee 2004)

(Alesina et al. 1999; Mossberger 2006)



Population segmentation and the allocation of political power

Geographic segmentation and discrimination (Squires and Kubrin 2005)

Enforcement of laws and regulation (Cuellar 2007)

Information about minorities (Galbraith et al. 2006)

U.S. welfare reform (Jennings 2001)



Potential Using ICT as:

Affirmative action (Franke 2007) A way to better implement legislations and regulations, e.g.,

Gender-based (Gayathri 2005) …

Challenge - How to formulate a pro-long run growth strategy to go from the digital divide to the promotion of digital opportunity?

Inequality is largely sustained through social discrimination buttressed by institutions, what digital divide strategy can best address those problems?

The window of opportunity is limited in time (McSorley 2003)





ICT’s potential contribution to growth?

Quah: “Inequalities in access to the Internet, extent of use, knowledge of search strategies, quality of technical connections and social support, ability to evaluate the quality of information, and diversity of uses… [ICT] can “mobilize political action, build institutions, and foster accountability and governance”

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