Impact of Information and Communication Technologies on Country Development: Accounting for Area Interrelationships

Single-item composite indices gauge ICT readiness at the country level but do not represent the direct impact of ICTs on a country's development. This paper describes a new approach to measuring the macrolevel impacts of ICTs across a range of development areas. The indirect effects of one area on others is taken into consideration by a simultaneous equation model that permits the inclusion of multiple development areas. The model is applied to data pertaining to four development areas in 64 countries: trade flows, agricultural productivity, R&D, and quality of life. ICT readiness is found to have a positive association with trade flows and R&D, but the impact depends on the country's development level. The strengths and limitations of this modeling approach, and the implications of the results, are assessed.