New report proves mobile broadband drives global economic development
From the time I started studying at the Stockholm School of Economics, I have been fascinated by the concept of productivity. Productivity improvements, after all, play a key role in spurring economic development, which in turn creates a wide range of new opportunities that enable more people to get out of poverty. As the Nobel laureate Paul Krugman once wrote: “Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” Hence, increased productivity will release resources that make it possible to improve other important indicators such as health, pollution, security and education.
Technology – an important driver
Throughout history, new technology has always been an important driver of productivity and economic development. In the case of mobile broadband networks, the technology has spread very rapidly, with connections increasing from approximately 27,000 in 2001 to 4.1 billion in 2016, according to GSMA. There are those who have questioned the assertion that this expansion has contributed to global economic development, though, suggesting that the causal relationship may, in fact, be solely in the opposite direction. In this view, investments in mobile broadband are seen to simply be a knock-on effect of strong economic development that would have happened anyway, without mobile broadband.
While it’s certainly true that strong economic growth has made it easier for both the public and private sectors to invest in mobile broadband since 2001, that truth does not negate the likelihood that global economic development has been spurred by widespread and continuously growing access to mobile broadband. We set out to investigate it.
Our collaboration with Imperial College
For the past several months, Ericsson has been working together with Imperial College in a joint research project investigating the extent to which the diffusion of mobile broadband has impacted economic development in terms of GDP. We used statistical methods to investigate causality, basing our research on data from 135 countries in total. Our report, How Important Are Mobile Broadband Networks for Global Economic Development?, reveals that mobile broadband is, in fact, significantly associated with GDP. We found that there is both a positive association when mobile broadband is first introduced and a longer-run effect as mobile broadband gradually diffuses throughout different economies.
The report provides strong evidence that it is mobile broadband introduction and penetration that is driving GDP development. We found that, on average, a 10% increase in the mobile broadband adoption ratio causes a 0.6–2.8% increase in economic growth depending on the model specifications.
What does it mean for the future?
This research is important from a policy perspective, because it proves that investments in mobile broadband are not merely “nice to have”. On the contrary, they are as crucial to continued economic development as investments in any other type of major infrastructure, and should be treated as such.
Many countries of the developing world have used mobile broadband technology to leapfrog in their economic development in the past 10-15 years. I believe that if these countries, and others, continue to invest wisely in mobile broadband, they will have an excellent opportunity to continue to reap the benefits of continuous productivity improvements and new economic opportunities that simply would not be possible without mobile broadband.
If you would like to read more on the topic of how broadband can act as a catalyst in sustainable development, make sure to check out the newly released State of Broadband annual report. This report provides a unique global snapshot of broadband network access and affordability, with country-by-country data measuring broadband access against key advocacy targets set by the Broadband Commission for Sustainable Development in 2011.