The effect of internet penetration on economic growth

Abstract

     The objective of this research is to investigate the effects of internet penetration on economic growth. Since the internet penetration conveys information to economic agents rapidly with lower transaction costs, it improves efficiency of many sectors in the economy. According to the assumption that the use of internet influences the technology of production, thereafter economic growth, a production function is estimated. The internet-use rate is considered as an independent variable. Other independent variables are inputs of production, such as labor, physical capital, and human capital. In order to estimate the production function, a panel of 76 provinces in Thailand from 2006 to 2014 is employed. The results of fixed effect model support the hypothesis that the internet-use rate influences outputs of production and it has level effect. Moreover, it is found that its effects are greater in the case of provinces in North and Northeast regions, which are the regions where internet-use rates are still low. The estimation results also show that other inputs, e.g.,labor and physical capital, affect the production