Studies in IT and Economic Development
Paper Session
Friday, Jan. 3, 2025 8:00 AM - 10:00 AM (PST)
- Chair: Diana Moreira, University of California-Davis
Digital Infrastructure and Local Economic Growth: Early Internet in Sub-Saharan Africa
Abstract
We study whether low-speed internet availability fosters local economic growth in rural areas of developing countries by analyzing remote towns in Sub-Saharan Africa. We measure local economic growth of each town by tracking nighttime light emissions. In a difference-in-differences setting, we exploit exogenous countrywide shocks to internet availability induced by submarine cable arrivals in the 2000s and use the rollout of national inter-regional fiber cables to identify towns incidentally connected early. We find that internet availability induces economic growth. Compared to a control group of similar but later connected towns, connected towns experience 11 percent higher light intensity, which translates to 3.3 percentage points higher annual economic growth in the years after internet connection. Additional results suggest this is mainly driven by per-capita productivity growth and not by migration into connected towns. The effect is stronger in towns with better access to regional markets and internet availability is associated with a shift from agriculture to manufacturing in regional employment.E-Reaching the Out of Reach: Evidence on Educating Out of School Children Using Digital Content and Remote Tutoring
Abstract
We estimate the impacts of providing children who have dropped out of school with tablets that have built-in educational software and a phone connection to a private tutor. We conducted a randomized control trial with 890 dropped-out children across Bangladesh. We find that the provision of tablets and tutors increases math scores by approximately 0.25 standard deviations (of the distribution of test scores) and language scores by approximately 0.17 standard deviations. Effects on academic achievement are especially strong for girls, compared to boys, as well as rural children. By contrast, the program did not affect noncognitive traits such as competence, self-esteem, and grit. Taken together, these findings provide one intervention that can improve the educational outcomes of dropped-out children in developing countries, as well as more broadly the educational outcomes of children whose attendance might be affected by temporary school closures due to pandemics or other emergencies.Digital Gains and Employment Pains? Evidence from Indian Manufacturing
Abstract
The rising adoption of digitalization, including information and communication technology (ICT), has become a crucial driver of value creation for firms. However, there are ongoing concerns about potential employment losses or stagnating job growth due to digitalization, especially amid the rapid advancements in artificial intelligence. This study uses micro-level data from both formal and informal sectors to quantify the benefits of digitalization for Indian manufacturing—a key destination for global companies diversifying their supply chains—and examines whether these gains come at the expense of employment growth. By measuring digital capital as an accumulation of weighted ICT investments, this study estimates a value-added function for firms and plants using a nested CES model, which allows for substitutability between physical and digital capital. Semi-parametric estimation methods that account for simultaneity between inputs and productivity reveal strong digital gains for manufacturing firms and plants in India’s formal and informal sectors from 2010 to 2021. Contrary to common beliefs, greater digital capital intensity is associated with higher labor and skilled-labor intensity in formal industries. Globally, digitalization—when paired with efforts to formalize industries—can enhance both value addition and employment.The Economic Consequences of IT: The IT Revolution’s Meager Benefits and Major Schisms
Abstract
The IT revolution, underway since around 1980, has featured mediocre growth and rising geographic, educational, and generational inequality. This stands in stark contrast to the broad prosperity and convergence experienced in the 1950s and 1960s. We attribute this change to a swivel in the leading edge of productivity growth away from manufacturing largely present in mid-sized towns to information technology mainly housed in “superstar” cities. Using a spatial model, we show how this can explain: rising prosperity and rapid housing inflation in superstar cities; falling relative wages in towns and the countryside; mediocre aggregate productivity due to increasing misallocation of labor; increasing labor market division as skilled workers crowd into cities and unskilled workers move out; and falling internal migration. Empirical evidence on the geographic evolution of US wages, house prices, technological change, and internal migration strongly support the predictions of the model.JEL Classifications
- O1 - Economic Development