The document discusses the potential for information and communication technologies (ICTs) to reduce poverty. It aims to provide a framework for understanding the role of ICTs through analyzing their impacts at various levels. The document examines results from macro-level studies that find a positive relationship between telecommunications infrastructure and economic growth. It also explores the micro-level impacts of ICTs on households and small businesses, finding that ICT access can increase welfare and consumption. Additionally, the document discusses how ICTs may help deliver important public services to the poor more effectively.

1. Information and
Communication
Technologies for
Development and
Poverty Reduction
The Potential of
Telecommunications
Edited by
Maximo Torero
Joachim von Braun

2. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods and
services
9. Final Comments
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3. 1. Motivation
 ICT brings with it high hopes of positive outcomes
in developing countries
 Strong inequality still remains in the use and
access of ICTs
 In absolute terms developing countries are still
well behind the developed world in access to ICTs
 Rapid growth in developing countries- partially a
result of low initial access
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5. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods and
services
9. Final Comments
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6. 2. Main Goal
Provide framework for
policy dialogue towards
better understanding of
the role of ICTs
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7. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods and
services
9. Final Comments
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8. 3. What are the potential impacts of rural
telephony?
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9. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods and
services
9. Final Comments
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10. 4. Five Questions
 What link exists between ICT growth and economic
growth?
 Do weak institutions block effective use of ICTs?
 Have ICTs been adapted to low-income countries,
and have they had an impact on SMEs?
 Does household access to ICTs remain
constrained?
 Can ICTs play a role in providing pro-poor public
goods and services?
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11. 4.1. To answer the five questions:
Driving Supply (Penentration) Demand Impact
Forces and Institutional (Utilization)
Designs
Impact at the Global Level
Chapter 3
Chapter 5
Infrastructure-
Provision of Service
Public, Private &
International
Households
Organizations
Content
Chapter 4 Impact at the Microeconomic Level
Chapter 6
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Chapter 2

12. 4.2. Where did we measure impacts?
U z b e k is t a n
C h in a
B a n g la d e s h
J a m a ic a In d ia L a o s V ie tn a m
U ganda
G hana Kenya
T a n z a n ia
P e ru
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13. 4.2. How did we select countries?
Main Telephones and GDP per Capita, 2000 (138 countries)
60000
GDP per Capita (1995 US$)
50000
United States
40000
30000
Japan
20000
10000
Peru Jamaica
India China
Lao P.D.R.
0
Tanzania
Uganda Bangladesh
0 10 20 30 40 50 60 70 80
Main Telephone Lines per '00' Inhabitants
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14. 4.3. How do we measure the impacts?
 Macro level models to measure impact over growth
 At the household or SME level:
• Models of Access
• Matching and Difference in Difference estimates
• Compensating Valuation
• Willingness to Pay
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15. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods and
services
9. Final Comments
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16. 5. Results at the Macro Level
• Tele-density positively associated with growth
and investment
• Telecom infrastructure appears to boost
investment by reducing uncertainty associated
with monetary shocks (e.g. Norton, 1992)
• Impact of tele-density on growth is restricted to
developed countries (Roller and Waverman,
1996)
• Minimum threshold of telecom density (around
24 percent) required for positive growth effects
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17. 5. Results at the Macro Level (ctd):
• Results for fix phones (Torero,
Chowdhury and Bedi;2004):
– Estimates based on 118 countries
– Positive causal relationship between
telecommunications infrastructure and GDP.
– 1 % increase in the telecommunications
penetration rate  0.03% increase in GDP.
– Nonlinear effect of telecommunications
infrastructure on economic output.
– Particularly pronounced impact for middle-
income countries
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18. 5. Results at the Macro Level (ctd):
• Results of Waverman, Meschi
and Fuss (2004):
– All else equal, in the “low income”
sample, a country with an average of 10
more mobile phones for every 100
people would have enjoyed a per capita
GDP growth higher by 0.59 percent.
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19. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods and
services
9. Final Comments
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20. 6. Institutions and ICTs
Importance of specific characteristics of ICTs:
• High fix cost and low marginal cost
• Complementarities
• Network externalities
• Pervasive
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21. 6. Institutions and ICTs (ctd)
• Natural Monopoly versus Access pricing
• Natural Monopoly framework implies that a multi-
firm industry is inefficient due to a less than
optimal scale of production
• Access pricing seems to be the answer but this
requires initial infrastructure, or what we call minimum
critical mass
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22. 6. Institutions and ICTs (ctd):
Model of network expansion and breakdown
Dollars
Average Cost
Utility
Network Size
n1 n2 n3 n
Critical Private Exit
mass point Optimum Point
Growth by Self-sustained Entitlement growth Growth by
external growth (directed growth) external
subsidy subsidy
Source: Noam (2001)
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23. 6.1. Institutions and ICTs: Some Results
Service shortfalls in some rural and peri-urban
areas can be solved without government
subsidies
• regulatory reforms are needed to let the
market work well
But even in well-working markets service will not
be commercially viable in some peri-urban areas
and in most rural areas
• subsidies may be justified to extend services
beyond the market
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24. 6.2. Institutions and ICTs: Specific
Recommendations
• Recommend regulatory changes to enable
the market to work better
• increased competition
• open to new technologies
• open to new business models
• Outline an approach to subsidies to extend
services beyond the market
• using market forces
• minimal regulation
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25. 6.3 How to do it
• Distinguish two types of urban service shortfalls:
• market efficiency gap
• real access gap
• For the market efficiency gap:
• identify current regulatory problems and issues that Ethiopia
regulatory agency can address
• examine new technologies that could help to reduce costs
• For the real access gap:
• draw on best practices developed in rural areas
• complement and extend these for application in urban and peri-
urban areas
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26. 6.3. How to do it (ctd)
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27. 6.4. Real Access Gap:
What best practices tell us
• Reliance on market forces:
• Bottom-up identification of demand
• Competition for the market
• Subsidies allocated through the market
• Minimal regulation:
• Freedom of business and technical choice
• Attractive licenses designed to encourage growth
• Limited price controls
• Cost-reflective access charges
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28. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods and
services
9. Final Comments
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29. 7. Results at the Micro Level
ICT may contribute to poverty alleviation
through:
• Making markets more accessible to both
households and small enterprises
• Improving the quality of the public goods
provision
• Improving quality of human resources
• More effective utilization of existing social
networks
• New institutional arrangements to strengthen
the rights and powers of poor people and
communities
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30. 7.1 Results at the Micro Level: Firms
• Early literature: limited evidence of productivity
effects (e.g. Berndt (1990), Loveman, (1994)
.Productivity paradox
• More recent (after 1987) and more accurate
data, Brynjolfsson and Hitt (1996): substantial
returns to investments in computers (48 percent)
• Difficult to measure, learning period, time lags
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31. 7.1. Micro Level results:
SMEs in India and Laos
India Laos
-Majority of businesses use fixed -Telephone widely used as
telephone, fax and computers primary means of information
gathering by rural businesses,
- PC and the Internet are and demand is high
underutilized
-Little evidence on the positive
-Firm size, location of market, impact of telephone use on firm
and availability are important performance
determinants of adoption
-Positive relationship between
ICT use and some performance
indicators.
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32. 7.2 Results at the Micro Level: Households
• Information is an indispensable ingredient in decision
making for livelihood of households
• Potential gains for rural households:
• time and cost saving
• more and better information, leading to better decisions
• greater efficiency, productivity, and diversity
• lower input costs and higher output prices
• expanded market reach
• Previous work trying to measure the consumer surplus:
Saunder et al. 1983, Bresnahan, 1986, Saunders, Warford
and Wellenius 1994, etc.
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33. 7.2. Results at the Micro Level
Households in Bangladesh, Peru and Laos
Bangladesh and Peru Laos
-Compared to alternatives, positive direct -Telephone increase consumption
monetary gain of the use of rural telephones.
- Per capita consumption increase in
- Estimated gains in welfare with respect to
approximately 22% and 24% in per
alternatives are:
capita cash based consumption.
Bangladesh: US$ 0.11 to 1.59 per call
Peru: US$ 1.62 to 2.91 per call
-Changes in telephone use between
2000 and 2001 - positive impact on
-Rural households willing to pay more than changes in consumption in the same
the prevailing tariff rates per local call: period
Bangladesh: US$ 0.10 to 0.26
Peru: US$ 0.25 to 0.35
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34. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods
and services
9. Final Comments
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35. 8. Role of ICTs in providing pro-poor public
goods
• ICTs can be a powerful tool for improving the
quality and efficiency of government social
services.
• Clear gap between the use of ICTs for the
delivery of public goods.
• Most of the cases of use of ICT in delivering
public services are isolated.
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36. 8. Role of ICTs in providing pro-poor public
goods (ctd)
• Cross country analysis indicates that
telecommunications investment may well be
associated with improved health status.
• A simple linear cross-country regression of the
growth rate of fixed phone lines explains about
11% of the growth rate variance for life
expectancy.
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37. 8. Role of ICTs in providing pro-poor public
goods: some examples of impact
• On farming technologies:
• giving information in the best farming technologies and price
changes in 30,000 villages across six states in India
• On health:
• telemedicine centers in Alto Amazonas, and in Andhra Pradesh,
India,
• HealthNet
• ProCAARE discussion forum and the WorldSpace Foundation
(WSF)-Africare HIV/AIDS initiative
• On education:
• education as the African Virtual University
• the distance learning university in India
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38. Outline
1. Motivation
2. Main Goal
3. Impacts of Rural Telephony
4. Five main questions
5. Results at the Macro Level
6. Institutions and ICTs
7. Results at the household and firm level
8. Role of ICTs in providing pro-poor public goods and
services
9. Final Comments
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39. 9. Final Comments
• ICTs- not a panacea
• ICTs can have an important impact at the macro
level once a critical mass is achieved.
• ICTs can have an important impact in linking
smallholders and SMEs to markets
• Need to differentiate market efficiency gap from
real access gap
• Government should play a major role in the real
access gap.
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40. 9. Final Comments (ctd.)
• Minimal conditions necessary for success:
• prompt deregulation
• effective competition among service providers
• free movement and adoption of technologies
• targeted and competitive subsidies to reduce
access gap
• institutional arrangements to increase the use of
ICTs in the provision of public goods.
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41. 9. Final Comments (ctd.)
• Two important things to keep in mind:
• Three C’s of ICTs: Connectivity, Capability to use
it, and Content. The latter is crucial specially to link
to markets.
• We need to look to new technologies: wireless
broadband technologies potentially offer a future
platform for delivery of voice telephony and
broadband services to peri-urban and rural areas
(leap-frogging).
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