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The Effect of Internet on Economic Growth : Focusing the Interaction with Government Size

and Quality

The Effect of Internet on Economic Growth : Focusing the Interaction with Government Size

and Quality

Jae Young Woo

2. 목 차

1. Introduction1. Introduction

2. Literature Review2. Literature Review

3.Experimental Methodology 3.Experimental Methodology

4 Empirical Results4 Empirical Results

5. Conclusion 5. Conclusion

ReferencesReferences

3

Background The Internet become the public sphere It plays a pivot role as a platform for

ideas, innovation, connection, and economic growth

However some previous studies that analyzed the relationship between Internet and growth did not consider the role of government size and quality

4

Purpose of Study to explore economic growth theory and

to estimate the question of how Internet which speeded the diffusion of information and knowledge underpins the economic growth process

and how it interact with two dimensions of the government's size dimension as measured by government share and quality dimension as measured by Gini

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Methods and Data the panel regression model using 30

OECD country panel data, over the period 1990 – 2007

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Differences to the previous research estimated in two different ways; the

Internet usage ratio and growth rate of Internet usage ratio

analyzed the time lag effects of main IV variables

use panel data techniques including fixed effect model and system GMM to control for unobservable country specific effects, and to tackle the endogeneity issue

Frame work of research

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Variables Definition and Sources

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Variabl

e Definition Source

Expected

sign

Dependent

variablesGrowth

growth rate of Real GDP Chain per

capita (RGDPCH) PWT6.3

Independent

variables

Internetratio of the Internet users to per

100 people(0 to 100 scale)World Bank +

GInternetgrowth rate of Internet user ratio

to per 100 peopleWorld Bank +

Kg

Government share of Real GDP

per

capita (RGDPL)

PWT6.3 +/-

Gini Gini Index(0 to 1 scale)WDI

LIS+/-

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Model Specification

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Three Relationship Model

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Three Relationship Model

Government Share or Quality(Gini Index) 

Government Share or Quality(Gini Index) 

Linear Degressive Non-linear Inverted U-curve

Linear Degressive Non-linear Inverted U-curve

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Descriptive statistics for the OECD

Variables N Mean S.D Min Max

grgdpch 540 2.32 3.20 -19.22 11.63

Internet 540 24.25 26.30 0.01 88.89

Kg 540 14.81 4.56 6.20 32.17

Gini 540 0.24 0.07 0.13 0.44

Inflation 540 7.18 26.67 -13.85 555.38

GDP 540 24,594 10,489 5326 74,366

GrPOP 540 0.57 0.51 -0.38 1.93

Ki 540 28.68 5.67 13.09 53.58

HDI100 540 91.15 4.92 70.00 97.10

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Pearson Correlation Matrix

Note) ***, **, * indicate coefficient estimates are statistically significant at 1%, 5%, 10% levels, respectively.Note) ***, **, * indicate coefficient estimates are statistically significant at 1%, 5%, 10% levels, respectively.

Variables

grgdpch

Internet

Kg GiniInflatio

nGDPt-1 GrPOP Ki HDI100

grgdpch

1.00

0.114*** 1.00

-0.156***

-0.171***

1.00

0.088** -0.091**-

0.344***1.00

-0.226***

-0.161***

0.152*** 0.168*** 1.00

0.011 0.482***-

0.514***-

0.335***-

0.278***1.00

0.008 -0.094**

-0.385***

0.497*** 0.125*** 0.122*** 1.00

0.280*** 0.202***-

0.462***0.100**

-0.164***

0.182*** 0.007 1.00

0.033 0.433***-

0.349***-

0.369***-

0.359***0.700*** -0.108** 0.168*** 1.00

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Current Kg Current Gini

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Current Internet Usage Rate and Kg

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Fixed Effects of Country and Year

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Time lagged Growth rate of Internet Usage and Kg

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Time lagged Internet Usage Rate and Kg

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Time lagged Internet Usage Rate and Gini

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System GMM Analysis

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Partial Effects of Interaction

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Summary of Theory Internet diffusion affects growth at the microeconomic

level through increased competition, fostering new role of the customer, economies of supply side and demand side scale, transparency and cost reduction

Internet diffusion enhances the economy at the macroeconomic level through the appearance of a new economy and increased trade

Internet diffusion reduces corruption and costs, and invigorate Internet governance and hence raises the level of quality of decision-making of government and firms, which improves the efficiency and effectiveness of resource allocations and human rights conditions

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Summary Internet diffusion affects growth at the microeconomic

level through increased competition, fostering new role of the customer, economies of supply side and demand side scale, transparency and cost reduction

Internet diffusion enhances the economy at the macroeconomic level through the appearance of a new economy and increased trade

Internet diffusion reduces corruption and costs, and invigorate Internet governance and hence raises the level of quality of decision-making of government and firms, which improves the efficiency and effectiveness of resource allocations and human rights conditions

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Implications The elimination of the major barriers for people

to use ICTs, such as the lack of accessibility and the low levels of knowledge and skills in using new technologies.

It is pre-condition making good Internet governance which realizes the social truth and enables virtuous circle through increasing monitoring and participation for active feedback.

The positive impact of Internet on growth will be reinforced by the income redistribution policy.