Impact of Information and Communication Technology on Economic Growth in Newly Industrialized Countries

Abstract

Information and communications technology (ICT) is one of the key factors explaining growth differentials across countries. Basically, ICT is hypothesized to have positive effects on productivity, and therefore helps raise economic growth. The objective of this study is to analyze the impact of ICT on economic growth by using data of 9 newly industrialized countries (NICs) over the period 1994-2011. Panel data analysis is carried out to examine the factors affecting economic growth of 9 NICs. The regression model is modified to measure factors that influence economic growth which is represented by per capita gross domestic product (GDP). Internet user is used to represent the current state of ICT; while other macroeconomics factors such as gross capital formation, household consumption, government consumption and trade ratio are also used to estimate economic growth. Three specification; pooled-OLS, fixed effects, and random effects specifications are estimated and tested for the most appropriate model. Hausman test shows that fixed effects specification is the most appropriate model. The Internet has positive and significant effect on economic growth as expected. Moreover, gross capital formation, household consumption and trade ratio have significant positive effect on economic growth. However, government expenditure has not shown significant impact on economic growth.