How information technology impacts economic growth and human development at the country-level

Abstract

The goal of this document is to understand the differences between two predominately used country-level measures of development, economic growth and human development, and how information and communication technology impacts each. Three studies are employed to gain further understanding of the characteristics of each development measure. The ICT themes of these studies are focused on individual’s freedoms to have and choose their desired states of well-being, vertical specialization within global supply chains, and the diffusion of technology across country borders. Within our first ICT theme, freedoms, four contextual conversion factors have been found to significantly impact human development: ICT cost, ICT infrastructure, and the interaction effect between e-participation and freedom of expression on the net. Our second theme, specialization, we find a partial moderation for the measure of a country’s ability to vertically specialize with the direct effects of a country’s level of ICT and economic growth. The direct effect weakens and the moderation effect gets stronger after the year 2004. In our last theme, diffusion, we investigate the three different channels that technology diffuses across nations: direct trade, foreign direct investment, and R&D spillovers. We find that direct trade has a significantly positive impact on economic growth, whereas foreign direct investment and R&D spillovers have a significantly positive impact on human development, but only with a 1-year and 5-year lag. In summary, economic growth is highly affected by international trade of technological goods and with the aid of ICTs. Human development is more built around social structures, and is impacted with social connections and freedoms to have and choose one’s own well-being.