S6 Ep1: How does internet connectivity impact developing economies?
Jan 8, 2025
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Lin Tian, an expert affiliated with INSEAD, discusses the economic impact of internet connectivity on developing countries. She explores the surge of internet access, particularly in rural areas, and the disparities it creates. The conversation highlights how internet connectivity enhances productivity, education, and employment opportunities. Tian also shares insights on how platforms like Alibaba empower small businesses by connecting them to global markets. Additionally, she discusses the transformative impact of AI on these economies and the importance of strategic government policies.
Rapid broadband internet access is growing in low-income countries, yet stark usage disparities persist between urban and rural areas.
Internet connectivity significantly boosts productivity and employment rates in developing regions, benefiting both skilled and less skilled workers.
Deep dives
Uneven Broadband Access and Mobile Internet Growth
Broadband internet access is growing rapidly in low- and middle-income countries, but there are significant disparities in usage across regions. For instance, only about 30% of people in sub-Saharan Africa use the internet, compared to over 70% in Latin America. The development of mobile networks has been crucial to this growth, particularly in rural areas, as mobile internet is cheaper and faster to deploy than traditional broadband. However, substantial gaps persist between urban and rural areas, and closing these gaps requires significant infrastructure investment from governments.
Impact of Internet on Productivity and Employment
Research indicates that internet connectivity enhances productivity and employment rates, especially for workers in developing countries. A study across various nations found that a 10 percentage point increase in 3G coverage led to a 2.1 percentage point rise in employment rates. Additionally, faster internet facilitates improved collaboration and monitoring within organizations, contributing to higher wages and productivity overall. Interestingly, both skilled and less skilled workers benefit from internet access, as it enables better job matching and remote work opportunities.
Internet's Role in Education and Market Access
The internet significantly impacts education by providing access to better resources and training, especially in remote areas. Programs in countries like China connect students with high-quality teachers online, resulting in improved test scores and future earnings. Furthermore, internet access has allowed small firms in developing countries to find international customers, although challenges like digital literacy and logistical barriers persist. Overall, while the internet provides new opportunities for education and market expansion, its benefits are unevenly distributed and depend on complementary factors like infrastructure and skills development.
For more than 30 years, optimists about technology have been telling us that the
internet is transforming our economies. What is the evidence that this has happened,
or is happening, in low- or middle-income countries? And if the promise has not been
fulfilled, why not? Lin Tian is one of the authors of a new paper that examines the
evidence so far. She talks to Tim Phillips about what the research is telling us.