Telecommunication infrastructure and economic growth: a case of Sub-Saharan Africa (1988-2010)

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Wainaina, Martin C.
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The need for an efficient, modern telecommunication sector is now regarded as crucial to economic growth in transition countries. Various studies have given conflicting findings on the relationship between economic growth and telecommunication. In addition, studies of different regions of the world have had different findings, with Africa recording least of these studies. Sub-Saharan Africa had registered the lowest levels of GDP growth across the world despite having registered the fastest growth rate in terms of telecommunication growth. This calls for a thorough investigation on the role, relationship and, direction of causality between telecommunication growth and economic growth. The objectives of the study were to; determine the relationship between mobile teledensity and economic growth; investigate the relationship between landline teledensity and economic growth and; analyze the effects of interaction between mobile teledensity and landline teledensity and how teledensity affect on economic growth. To achieve the objectives, the study adopted the neoclassical growth model developed by Solow and Swan (1956).Using relevant diagnostic tests, Generalized Method of Moment (GMM) method of estimation was used on the panel data from 44 of Sub-Saharan Africa countries (1988 to 2010), the study found out a two-way causality for mobile teledensity and economic growth. On the other hand landline teledensity growth was found to influence economic growth and not vice versa. In addition telecommunication investment was found to be subject to diminishing returns, suggesting that countries at an early stage of development are likely to benefit most by investing in telecommunications infrastructure. Other factors found to influence growth included; population growth, investment, and trade openness. The study proposes that the respective governments of sub-Saharan countries should implement policies that enhance the development of the telecommunications sectors in their respective countries, increase attention to measures that would increase mobile telephone penetration. The respective government should focus on measures that would attract more foreign direct investment, allow more reforms in the telecommunication sector to allow more investment and eliminate or reduce barriers to trade. This is because the result shows that removal of trade barriers increases trade amongst countries. In addition increased trade will see further usage of mobile telephone to transact business.