Mobile Phones and Economic

Development in AfricaJenny C. Aker & Isaac M. Mbiti

Presented by Meredith Millard

About the Authors

Jenny C. Aker- Assistant Professor of Economics at Tufts University- Deputy Regional Director in West and Central Africa (1998-2003)- Works on development in Africa focusing on information and technology in development outcomes

Isaac M. Mbiti- Assistant Professor of Economics at SMU- Research in development, labor economics, and demography- Spoke at Baylor last spring for the Global Business Forum “Emerging Africa”

Sub-Saharan Africa - Contrasts to North Africa, viewed as part of the Arab World - estimated 800 million population- Roughly 9% of global population- Low levels of infrastructure

investment- 29% of roads are paved- 25% has stable access to

electricity- 3 landlines per 100 people

- But mobile phone use is on the rise- 10x as many mobile phones as

landlines- 60% of population has mobile

phone coverage

Sub-Saharan AfricaAngolaBurundiDRCRwandaSao TomeCameroonCARChadEquatorial GuineaGabonKenyaTanzaniaUgandaDjiboutiEritreaEthiopiaSomalia

BotswanaComorosLesothoMadagascarMalawiMauritiusMozambiqueNamibiaSeychellesSouth AfricaSwazilandZambiaZimbabweBeninMaliBurkina FasoCape VerdeCote d’Ivoire

GambiaGhanaGuineaGuinea-BissauLiberiaMauritaniaNigerNigeriaSenegal Sierra LeoneTogoRepublic of the CongoSouth Sudan (2011)Sudan (disputed)

Previous Literature

Existing LiteratureMobile Phones and Economic Benefits

(Jensen, 2007; Aker, 2008; Aker, 2010; Klonner and Nolen, 2008)

Mobile Phone Adoption Patterns (Ahmed, 2007; Baliamoune-Lutz, 2003; Kshetri and Chung,

2002; Donner, 2008)

Gaps in Existing LiteratureMobile phone adoption impact on macroeconomics and

public goods

Methods & Research

Previously Published Research- Previous literature- Private firms (Safaricom, M-Pesa, etc.)- Data Mining (GMSA, UN, World Bank,

etc.)

Consequences of Mobile Phones for Economic Development in Africa

Five Potential Mechanism

Mechanism #1

Mobile Phones can improve access to and use of information, reducing search costs, improving coordination among agents, and increasing market efficiency

- Initial fixed cost of mobiles is significantly lower than equivalent transportation and opportunity cost

- Mobile phones are more accessible than other communication alternatives in terms of cost, geographic coverage, and ease of use (compared to television, radio,

newspapers, etc.)- Enables an active rather than passive role in search

process- Limits waste in markets with highly-perishable

commodities

Mechanism #2

Increased communication should improve firms’ productive efficiency by allowing them to better manage their supply chains.

Mechanism #3

Mobile phones create new jobs to address demand for mobile-related services, thereby providing income-generating opportunities in rural and urban areas.

- Formal sector employment in the private transport and communication sector in Kenya rose by 130% between 2003-2007 (CCK, 2008)

- Unmeasured informal sector employment

Mechanism #4

Mobile phones can facilitate communication among social networks in response to shocks, thereby reducing households’ exposure to risk

- Natural disasters, political events, and violent conflicts

Mechanism #5

Mobile phone-based applications and development projects (m-development) have the potential to facilitate the delivery of financial, agricultural, health, and educational services

- M-Banking: M-Pesa (begun in 2007)

- $3.7 billion USD transferred by 2010- Health practitioners- Election campaigns & monitoring- “Crowdsourcing” – increased transparency- Literacy Promotion – texting curriculum

Conclusions

- Empirical evidence shows that mobile phones have the potential to benefit consumer and producer welfare and broaden economic development

- The challenge is to ensure complementary access to public goods and the development of appropriate policies to evaluate and propagate the benefits of mobile phones throughout the continent

Criticisms

- Endogeneity problems between mobile phones and economic growth (concerns may be addressed by using landline availability as a instrument for current mobile use)

- Lack of credible research on proliferation of mobile use because some owners have several SIM cards and phones while other phones are used between several users

Areas of Future Research

- What is the macroeconomic effect of widespread mobile phone usage?

- As a transformative development tool, what policies can increase mobile usage?

- How can we obtain more reliable access data?

Comments & Questions