Technological Change in Information-Processing Industries and Regional Income Differentials in Developing Countries

It is generally believed that the computer revolution and advances in information processing will erode one of the last constraints on the location of economic activities, namely the reliance on face-to-face contacts in the quaternary industries. There will be no need for these activities to cluster in core region metropolitan cities. They can become footloose and disperse to other regions according to locational preferences or other reasons. Whatever the merits of this idea, this paper argues that this will not happen in developing countries. Using a core-periphery model, it shows that as long as unit transport, communication, and contact costs are higher in the periphery than in the core, the impact of technological progress in the information-processing sector will tend to widen coreperiphery disparities rather than to narrow them. The policy options in this situation are quite limited.