ICT and the Digital Divide: Does it Matter? July 2011

ICT and the Digital Divide: Does it Matter?: 

ICT and the Digital Divide: Does it Matter? Chris Doyle Department of Economics ESRC-CAGE Workshop on Inequality Session 4: Identity, Technology, Adoption and Inequality 6 July 2011

The Digital Divide: 

The Digital Divide Term made popular in speech by President Clinton and Vice President Gore, Knoxville, TN, 1996, 10 October: “ Well, today that dream is fast becoming a reality. Two years ago, President Clinton and I challenged America to connect every classroom – inner-city , rural, suburban – to the Information Superhighway by the year 2000. We challenged the nation to ensure that all of our teachers and students have access to modern computers and engaging educational software. We challenged the nation to provide all teachers with the training and support they need in order to help students make the most of these wonderful new technologies. We challenged the nation to make sure that our children will never be separated by a digital divide. ”

What is it?: 

What is it? The Digital Divide has economic ramifications stemming from the differing amount of information between those who have access to the Internet (especially fast broadband access) and those who do not have access In high and middle income countries the divide is between those with fast broadband access and those without In low income countries the divide is between those with access to the Internet and those who do not The term is interpreted (e.g. Eurostat) to include access to ICTs, as well as the related skills that are needed to take part in the information society The digital divide can be classified according to criteria that describe the difference in participation according to: Gender Age Education Income Social groups or Geographic location

Much discussed: 

Much discussed Warschauer, Mark (2004) Technology and Social Inclusion Rethinking the Digital Divide MIT Press Witte, James C. and Susan E. Mannon (2010) The Internet and Social Inequalities Routledge Bauerlein, Mark (2011) The Digital Divide Jeremy P. Tarcher press, forthcoming September

Does it matter? UNCTAD thinks so…: 

Does it matter? UNCTAD thinks so… “The digital divide between the information-rich and the information-poor is of increasing concern. A major challenge for policy-makers at the national and international level, therefore, lies in addressing the issue of digital divide between rich and poor countries, rural and urban areas, men and women, skilled and unskilled citizens, and large and small enterprises . “Information and communication technologies (ICTs) offer unique opportunities for developing countries to narrow the development gap with industrialized countries. They have the potential to assist developing countries “leap frog” entire stages of development. However, despite the potential benefits offered by ICTs, significant barriers to their effective use exist in both developed and developing countries. These barriers must be addressed to allow the realization of the full potential of ICTs'. Some barriers may be endemic (e.g. the generation gap, learning processes and gaining experience in ICTs). Developing countries have to deal with problems of telecoms infrastructure, poor computer and general literacy, lack of awareness of the Internet and regulatory inadequacy .” Source: The Digital Divide Report: ICT Diffusion Index UNCTAD ( 2006) at http://www.unctad.org/en/docs/iteipc20065_en.pdf

Does it matter? The EU thinks so…: 

Does it matter? The EU thinks so… Key Performance Broadband Targets: Basic broadband for all by 2013: basic broadband coverage for 100% of EU citizens . Fast broadband by 2020: broadband coverage at 30 Mbps or more for 100% of EU citizens . Ultra-fast broadband by 2020: 50% of European households should have subscriptions above 100Mbps. Digital inclusion: Increase regular internet use from 60% to 75% by 2015 and from 41% to 60% for disadvantaged people (Baseline figures are for 2009). Halve the proportion of population that has never used the internet by 2015 ( to 15 %). (Baseline: In 2009, 30% of individuals aged 16-74 had never used the internet.) See: Annex 2 in COM(2010 ) 245 COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT , THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS “A Digital Agenda for Europe”, Brussels 19 May 2010

Fast and ultra-fast broadband: 

Fast and ultra-fast broadband Source: COM(2010 ) 472 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS European Broadband: investing in digitally driven growth. Brussels , 20.9.2010

Does it matter? The EU thinks so…: 

Does it matter? The EU thinks so… Source: SEC(2011 ) 708 COMMISSION STAFF WORKING PAPER Digital Agenda Scoreboard, Brussels, 31.5.2011

Does it matter? The US thinks so…: 

Does it matter? The US thinks so… The 2010 Broadband Action Agenda has four key goals: Promote World-Leading Mobile Broadband Infrastructure and Innovation Accelerate Universal Broadband Access and Adoption, and Advance National Purposes Such as Education and Health Care Carry out transformation of the Universal Service Fund over the next ten years to support broadband service Upgrade the E-Rate program, which has successfully connected public libraries and K-12 classrooms, benefiting students across the country by making broadband more accessible Reform and upgrade the Rural Health Care Program to connect more public health facilities to high speed Internet facilities and to foster telemedicine applications and services. Create a Connect America Fund to extend broadband service to unserved areas of the nation and to ensure affordable broadband service in high-cost areas where support is necessary. Create a Mobility Fund to bring all states to a baseline level of "3G" (or better) wireless coverage. Foster Competition and Maximize Consumer Benefits Across the Broadband Ecosystem Advance Robust and Secure Public Safety Communications Networks http://www.broadband.gov/

Broadband and inequality in the US: 

Broadband and i nequality in the US “Advanced Internet technologies spread rapidly [after 1995] in businesses across the country—in small cities, sprawling suburbs, and dense urban hubs. Although this sparked wage and employment spurts everywhere, the gains were far more striking in regions that were already well off.” Source: “What has the Internet Done for the Economy? The puzzling spread of the commercial Internet could explain wage inequalities” based on the Research of Christopher Forman, Avi Goldfarb and Shane Greenstein Kellogg Insight at http:// insight.kellogg.northwestern.edu/index.php/Kellogg/article/what_has_the_internet_done_for_the_economy Forman , Chris, Avi Goldfarb, and Shane Greenstein (2011) “The Internet and Local Wages: A Puzzle”, American Economic Review , f orthcoming

Does it matter? India thinks so…: 

Does it matter? India thinks so… “India today stands at the threshold of great opportunities. A growing and robust economy, a young and increasingly literate population and wide technological base give it the opportunity of emerging as a major power. At the same time, it faces the challenges of reducing poverty and inequity. World over, it has been recognised that Information and Communication technologies play a significant role in bridging the divide between the poor and the non-poor. In our country, while voice communication has, doubtless reduced isolation, the penetration of Internet and broadband has remained low, mainly due to a limited spread of wireline telephones and non availability, so far, of Broadband technologies . With the launch of 3G services, the stage is set for rapid spread of Broadband . At the same time, there is an urgent need for a nation-wide Broadband network to reach Education, healthcare, banking and other services to all the villages. Such a network would truly help in realising the objective of inclusive growth. It is in this context that TRAI had initiated efforts, in July, 2009, for the spread of broadband in the country. In May this year, again, it has launched a Consultation Paper on the National Broadband Plan which has received wide and enthusiastic response from all stakeholders. Based on the Consultation process , TRAI has formulated the present Recommendations suggesting a National Broadband Plan, to be executed by the year 2013. It is, doubtless, a formidable task but a task that can be achieved .” Dr . J.S.Sarma Chairman, TRAI http://www.trai.gov.in/

Does it matter? India thinks so…: 

Does it matter? India thinks so… According to TRAI ICTs can help achieve the UN Millennium Development Goals: Eradicate extreme poverty and hunger Increase access to market information and reduce transaction costs for poor farmers and traders Achieve universal primary education Increase supply of trained teachers through ICT – enhanced distance training Promote gender equality and empower women Deliver educational and literacy programmes specifically targeted to poor girls and women using appropriate technologies

Does it matter? The UK thinks so…: 

Does it matter? The UK thinks so… Environment Secretary, Caroline Spelman, 27 May 2011: “ Broadband is vital to the economic and social growth of rural communities, and the Government is determined to ensure that all the benefits of fast and reliable access is available to people across the countryside. “ Our new £20million Rural Community Broadband Fund will also help to end the rural digital divide allowing farmers to file vital paperwork online, schoolchildren to do their homework online and for people in the countryside to enjoy the social networking and online shopping that the rest of us take for granted.” Culture Secretary Jeremy Hunt, 27 May 2011: “ Broadband is becoming just as essential to homes and businesses as electricity and telephone lines and it is now only a matter for time before people in these three rural areas have access to the connection speeds more commonly associated with towns and cities .” Source : £50m funding package for next wave of rural broadband , Press Release 050/11, 27 May 2011 at http://www.culture.gov.uk/news/media_releases/8167.aspx

And others too…: 

And others too…

ICT, Internet, Growth & Inequality: 

ICT, Internet, Growth & Inequality “In the 21 st century, affordable broadband access to the Internet is becoming as vital to social and economic development as networks like transport, water and power” Dr. Hamadoun Tour é, ITU Secretary-General Source: “Broadband Internet- The New Digital Divide?” at http:// www.itu.int/en/broadband/Documents/backgrounders/broadband-internet-digital-divide.doc Policies are predicated on beliefs that ICT, Internet access (broadband) and usage are good for: Economic growth Reducing economic, social and gender inequalities Empowering citizens

Endogenous Growth Theory: 

Endogenous Growth Theory “Economic growth involves a two-way interaction between technology and economic life: technological progress transforms the very economic system that creates it .” Aghion P. and P. Howitt (1998), Endogenous Growth Theory , MIT Press, Cambridge (Mass), p. 54 “network connectivity has a special relationship with endogenous growth, not only in connecting businesses to a pool of knowledge and promoting the exchange of ideas, but also in allowing civil society to engage with government and access official resources and information. The network’s function as an enabler of innovation allows it to generate constant or increasing returns at the whole-economy level. In that sense, it can be treated as a public-investment good akin to education or R&D. The impact of network technology may be especially great in poor countries. This is because connectivity can help poor countries access the knowledge and technologies commonly used in the rich world, while simultaneously improving the quality of governance and institutions that enable citizens to engage in profitable investment, innovation, and material advancement, thus breaking out of poverty .” Zenghelis, Dimitri (2011) “The Economics of Network-Powered Growth”, Cisco White Paper, January, at http://www.cisco.com/web/about/ac79/docs/Economics_NPG_FINALFINAL.pdf

Slide 19: 

Source: Dale Jorgenson (2010) Theodore W. Schultz Lecture given to the Agricultural and Applied Economics Association Atlanta, Georgia, January 3, 2010

Growth and Inequality: 

Growth and Inequality Kuznets (1963) inverted U-shaped relationship between income inequality and per capita product An empirical regularity argued by Barro (2000) as relevant today Robert J. Barro (2000) “Inequality and Growth in a Panel of Countries” Journal of Economic Growth , 5: 5–32 ( March) Barro (2000) “an indication that inequality retards growth in poor countries but encourages growth in richer places…a dynamic effect whereby the adoption of each type of new technology has a transitory, Kuznets type effect on the distribution of income” “Inequality has been rising since the 1970s – ICT and the Internet has emerged in the late 1990s”

Endogenous Growth and Inequality: 

Endogenous Growth and Inequality Aghion, Caroli and García-Peñalosa (1999, JEL ) “We show that, in some instances, greater inequality may reduce an economy’s rate of growth. The immediate implication of our analysis is that redistribution can foster growth” Economic growth in last two decades or so has been associated with: Trade and financial markets liberalisation (opening up of markets, e.g. China, India, South Africa, Latin America, etc.; increase in derivatives trading and management of risks) Technical change (especially ICT, in part drives financial markets) New organizational forms (flatter forms, greater delegation, etc.)

The Microeconomics of Broadband for all: 

Direct economic benefits – GDP and productivity goals Broadband and faster speed enable at least three types of effects: Lower costs and higher quality services Retailing Banking, credit card management, other financial services, etc. Software distribution Process improvements in production and services Music, films, TV programmes Improved and shared information/experiences about products and services Advertising Farming, Fishing Blogs Review sites Gains in public service management lower tax burden eHealth Online education initiatives eGovernment The Microeconomics of Broadband for all

GDP and productivity goals: Evidence: 

“10 percentage-point increase in broadband penetration raises annual per-capita growth by 0.9-1.5 percentage points .” Nina Czernich, Oliver Falck, Tobias Kretschmer, Ludger Wössmann (2011) “Broadband Infrastructure and Economic Growth ” The Economic Journal , May “Studies from Canada, the United Kingdom, and the United States find that broadband connectivity has a positive economic impact on job creation, community retention, retail sales, and tax revenues (Ford and Koutsky 2005; Kelly 2004; Strategic Networks Group 2003; Zilber, Schneier, and Djwa 2005 ).” Mohsen Khalil, Philippe Dongier, and Christine Zhen-Wei Qiang for The World Bank (2009), “Extending Reach and Increasing Impact”, page 5 “We observe $39 billion of total revenue in Internet access in 2006, with broadband accounting for $28 billion of this total. Depending on the estimate, households generated $20 to $22 billion of the broadband revenue . Approximately $8.3 to $10.6 billion was additional revenue created between 1999 and 2006. That replacement is associated with $4.8 to $6.7 billion in consumer surplus , which is not measured via Gross Domestic Product (GDP ).” Shane Greenstein and Ryan C. McDevitt (2009) “The Broadband Bonus: Accounting for Broadband Internet’s Impact on U.S. GDP” Kellogg School of Management and Department of Economics, Northwestern University , respectively GDP and productivity goals: Evidence

Productivity goals: Evidence at the regional level: 

“Two regional broadband development programmes were investigated, in Cornwall (UK) and Piedmont (IT). Both programmes focus on the adoption of value-added broadband services in companies and in public services. Four years after the start of the actnow programme, 10% additional yearly growth and 7% additional productivity increase per year in the business services sector can be observed in Cornwall as compared to the rest of the country. Two years after the start of the WI-PIE programme, the regional IT observatory recorded progress of 9% per year on average in the regional broadband-related economic indicators .” Martin Fornefeld, Gilles Delaunay, Dieter Elixmann (2008) “ The Impact of Broadband on Growth and Productivity ” A study on behalf of the European Commission (DG Information Society and Media ) “We find that between 1998 and 2002, communities in which mass-market broadband became available by December 1999 experienced more rapid growth in employment, number of businesses overall, and businesses in IT-intensive sectors .” William H.Lehr, Sharon E. Gillett, Marvin A. Sirbu (2005) “Measuring Broadband’s Economic Impact” Broadband Properties , see http://www.broadbandproperties.com/2005issues/dec05issues/Measuring%20Broadband%20Eco%20Impact,%20Lehr,%20Gilett,% 20Sirbu.pdf Productivity goals: Evidence at the regional level

Broadband for all – externalities: 

Indirect economic benefits – externalities and happiness goals Always online and faster speed enable at least three types of effects: Broadband provides a superior service and spillover effects Broadband purchases stimulates economic activity elsewhere (equipment such as WiFi) Increases consumers willingness to pay (WTP) not captured in GDP Non-pecuniary benefits (happiness) Social inclusion effects Participation in debates and plurality Broadband for all – externalities

Externalities and Happiness: Evidence: 

“Our analysis suggests that IT has an enabling and empowering role in people's lives, by increasing their sense of freedom and control, which has a positive impact on well-being or happiness .” BCS Chartered Institute of IT survey reported May 2010, see http://www.bcs.org/ “The biggest uplift in life satisfaction is achieved by people getting online for the first time. In their first couple of years online the difference that the internet makes in improving life satisfaction is most noted. The BCS [see above] research also found the biggest benefit to wellbeing from being online would be achieved by providing access to those on low incomes and with fewest educational qualifications.” The digital divide and happiness – a presentation of the evidence, UK Online Centres, April 2011 Externalities and Happiness: Evidence

The Digital Divide: Does it matter?: 

The Digital Divide: Does it matter? It matters if a digital divide exacerbates income and wealth inequality which leads to lower growth in per capita income (endogenous growth) Embeds and amplifies existing health and educational inequalities, reinforcing inter-generational inequality (impacts negatively on social mobility) Results in social exclusion which may increase the cost of negative externalities (crime, terrorism, etc.)

Research Issues & Conclusion: 

Research Issues & Conclusion Little published research examining the relationship between ICT access, broadband and inequality Some have argued (e.g. Bonfadelli (2002)) that the Internet may widen ‘knowledge gaps’ and exacerbate inequality Others have argued (e.g. Cairncross (1997)) that by making information more accessible this enhances informational, social and economic equality Policy makers believe that ICT and the Internet matters and considerable resources are devoted to various programmes More research is needed to understand the implications of ICT and broadband on inequalities in a developing context