The GovLab Selected Readings on the Internet as a Global Economic Driver

As part of an ongoing effort to build a knowledge base for the field of opening governance by organizing and disseminating its learnings,  the GovLab Selected Readings series provides an annotated and curated collection of recommended works on key opening governance topics. The Governance Lab @NYU (GovLab) cross-posts weekly on CGCS’s Internet Policy ObservatoryThis edition of selected readings explores the literature on The Internet as a Global Economic Driver, the original post can be found here.

In this second installment of the GovLab Selected Readings on Internet Governance, we look at publications that explore the economic impact of Internet technologies around the world, as well as the various types of “fragmentation” that can negatively affect the Internet’s potential to develop local, national, regional, and global economies. The selected readings find, for example, that the Internet adoption is both linked to GDP-growth and that GDP-growth in turn spurs Internet adoption; that barriers to Internet connectivity directly and negatively affect economic growth; and that the Internet is playing a major role in improving the economic security of developing countries.

Selected Reading List (in alphabetical order)

Annotated Selected Reading List (in alphabetical order)

Alguliev, Rasim, and Yusifov, Farhad. Economic View of Internet Freedom Issue. International Conference on Digital Society. March, 2014.

  • This paper examines the “relationship between the Internet freedom and various social, political and especially economic factors, as they affect the Internet growth”.
  • It begins by discussing the notion of “information freedom”, which includes a country’s “economic condition, regional position, political views, etc.” and also includes citizens’ Internet access speeds.
    • The authors argue that information freedoms when combined with other socio-economic factors can produce information asymmetries (and “information monopoly, information dictatorship, information imperialism”) as well as create conditions where crime can prosper.
    • Information freedom exists in what the authors call an “information environment”, which “can concern the society as a whole”, or any of society’s different fields (e.g. economy, science, culture), or different spheres (e.g. global, national, regional, local).
  • The authors discuss “factors affecting Internet freedom” and categorize these into objective and subjective factors. These include, for example, “absence of information resources in accordance with national standards”, “absence of feedback”, and “installation of different filters”. The authors argue that, “a system of indicators characterizing the economic potential of the country must be developed considering economical potential of the country”.
  • The authors go on to discuss “correlation between volume of per capita GDP and number of Internet users” and find a “strong relationship between a country’s GDP and Internet penetration”, and thereby find support for their hypothesis that, “the higher a country’s GDP per capita, the more likely that it has Internet access”.

Value of Connectivity: Economic and Social Benefits of Expanding Internet Access. Deloitte. February, 2014.

  • This report examines “barrier to affordable [Internet] access and the efficacy of potential solutions” and describes connectivity as “critical to accelerating economic and social growth in developing economies, while enabling the transition from a resource-based to a knowledge-based economy”.
  • The report describes the Internet as being “all about services to people and communities, allowing them to achieve their potential”. It finds that there is no tradeoff between Internet access and “basic necessities”, but that “they need to work together to allow societies to flourish”.
  • The report explains several ways by which the Internet enables economic growth:
    • Internet access –enhancing the “productivity of labor and capital”.
    • Information flows –enhancing the “speed and quality of information flows in reduced transaction costs”.
    • Innovation –“adoption of new organisational models and business practices”.
    • Financial capital access –“enhanced access to financial capital with services such as mobile banking”
    • Entrepreneurship –“access to new markets” and “facilitation of entrepreneurship and business expansion”.
    • Labor Enhancement –“improved human resources qualification and specialisation”.
  • The report finds that “increasing Internet access to levels experienced in developed countries” can produce a 72% increase in GDP growth rate in the developing world.
  • The report also discusses the Internet’s potential to enable health improvements, unlock “universal education”, and promote “public services, social cohesion, and digital inclusion”.

Fox, Susannah, and Rainie, Lee. The Web at 25 in the U.S. Pew Research Internet Project. February 27, 2014.

  • This report marks the 25th anniversary of the creation of the World Wide Web and surveys the “rapid change in Internet penetration over the last quarter century”, as well as explores “some of the economic change driven by the spectacular progress that made digital tools faster and cheaper”.
  • The report finds that Internet usage is near saturation in American households earning $75,000 or more, and that 90% of American Internet users believe the Internet has “been a good thing for them personally”.
  • Digital technologies are found to be seen –across society—as “increasingly essential”, in particular Internet and mobile technologies. Television, on the other hand, is seen as easier to give up.
  • The report also finds that “most Internet users think online communication has strengthened their relationships”.

The Impact of Broadband on the Economy: Research to Date and Policy Issues. International Telecommunications Union. April, 2012.

  • This report by the ITU –the UN body in charge of telecommunications-related issues– examines the economic and social impact of broadband technologies over the past twenty years.
  • The report finds that broadband is a challenge for researchers to gain insights about because:
    • “Its deployment has proceeded at an incredibly fast pace”; and,
    • “Only the countries that have understood early on its economic potential have proceeded to collect statistics at the beginning of the diffusion process”; and,
    • “It only has an economic effect in combination with the adoption of information technology, and the implementation of organizational and process changes in enterprises”.
  • The report goes on to point out that broadband’s impact on economic growth is difficult to ascertain because economic growth itself may often contribute to greater broadband deployment. Given this ambiguity, the report finds that:
    • In countries with a higher adoption of broadband, broadband contributes more to economic growth.
    • Broadband has the greatest impact in “sectors with high transaction costs” such as financial services and tourism/lodging.
    • Broadband “enables the adoption of more efficient business processes and leads to capital-labour substitution” in less developed countries.
    • Broadband takes longer to produce impacts in small and medium businesses than it does to produce impacts in larger enterprises.
    • The economic impact of broadband adoption is greater when broadband adoption is combined with the promotion of other innovative applications.

Internet Matters: The Net’s Sweeping Impact on Growth, Jobs, and Prosperity. McKinsey Global Institute. May, 2011.

  • This report examines the Internet economies of the G-8 nations as well as of Brazil, China, India, South Korea, and Sweden. It finds that the Internet “accounts for a significant and growing portion of global GDP”, and that Internet-related production and consumption outstrips the agriculture or energy sectors.
  • The report finds that:
    • On average, the Internet contributes to 3.4% of GDP across all of the countries covered in its research.
    • “Most of the economic value created by the Internet falls outside of the technology sector, with 75 percent of the benefits captured by companies in more traditional industries”.
    • The U.S. is “the largest player in the global Internet supply ecosystem”, with more than 30% of global Internet revenues accruing to the U.S.
  • The report concludes that the public sector should make efforts to “promote broad access to the Internet” because of findings that both Internet access and the quality of Internet infrastructure contributes significantly to higher growth in per capita GDP.

A Broadband and Internet Economy Metric Checklist: A New Approach. Organization for Economic Cooperation and Development (OECD). June, 2011.

  • This report considers new approaches to developing “a set of broadband and Internet metrics” to help answer policy questions such as:
    • “Conditions supporting broadband deployment and adoption”; and,
    • “How adopting broadband affects productivity and growth”; and,
    • “The best way to gather timely, internationally comparable data within limited statistical budgets”.
  • The report proposes a “metrics checklist” to analyze “what drives the adoption of broadband and the Internet, and their effects on the economy”. The “metrics checklist” is aspirational because it seeks to collect data that is not currently collected but “ideally would be collected to provide the maximum descriptive and analytic capability”.
  • The checklist proposes indicators for both short-term and long-term goals.
    • Indicators for short-term goals like broadband deployment and adoption include:
      • Speed tiers
      • Number of competitors
      • Technology differentiation
    • Indicators for long-term goals like network performance and consumer demand include:
      • Customer-survey metrics
      • Usage data
      • Subscriber price data and cost of broadband deployment by technology

Zwillenberg, Paul, Dominic Field, and David Dean. Greasing the Wheels of the Internet Economy. Boston Consulting Group. January 20, 2014.

  • This report commissioned by ICANN describes various sources of “e-friction”, or “the numerous factors that inhibit online interactions and exchange”. The report proposes four components of such “e-friction”:
    • Infrastructure Friction – “types of friction that reduce opportunities to access the Internet” such as access, speed, speed, price, traffic, and architecture.
    • Industry Friction – “types of friction that keep companies from adopting the Internet”, such as infrastructure, labor, capital, economy, and technology.
    • Individual Friction – “types of friction that deter consumers from engaging in online activity”, such as education, trust, and availability of finances.
    • Information Friction –“types of friction related to the availability of content”, such as registered domains, content, open data, and censorship.
  • The report finds that infrastructure factors (such as access and cost) by far account for the most friction in online interactions and exchange, and therefore gives infrastructure friction the greatest indicator weight. The report finds that the GDP difference between countries with low e-friction and countries with high e-friction is a significant 2.5%.
  • The report concludes that “smart policy can reduce e-friction”, for example policies that promote infrastructure investment and do not overregulate private business.

Leave a Reply

You must be logged in to post a comment.