Investment in telecommunications infrastructure, growth, and employment - recent research

Abstract

Telecommunications investment has been identified as one with a strong potential to spur economic growth and create employment. Investments in telecommunications infrastructure could not only provide a short-term boost to the economy, but also lay the groundwork for long-term improved growth and employment perspectives. Many fiscal stimulus programs adopted by national governments to lessen the impact of the recession and boost economic recovery include substantial stimulus investments related to digital infrastructure. Indeed research findings indicate that telecom investment has an impact far beyond the scope of the industry itself, promoting growth in adjacent industries and creating new industries. Telecommuni-cations investment explains up to one third of economic growth. With regard to employment, telecommunications investments have contrary effects: On the one hand, it is widely acknowledged telecom investments lead to significant productivity improvements. Increased efficiency is certainly beneficial for the economy; however, process optimization may lead to job losses. On the other hand, various direct and indirect employment effects can be identified that contribute to create new jobs. Therefore, the question arises whether negative or positive effects prevail. Our article gives an overview of the most important studies and their key findings, addressing methodology and assessing total contributions of telecom infrastructure investment to GDP growth and employment in important economies in Europe, North America and other parts of the world. We review ICT productivity studies, econometric studies analyzing the relationship between broadband infrastructure and economic development, and "forward looking" studies estimating the multiplier effects of telecom investments. Most evidence indicates a strong and robust positive relationship between telecom investment and both economic growth and employment. These results confirm that investments in digital infrastructure may significantly contribute to overcome the adverse effects of the economic crisis and improve long-term growth prospects.