The non-linear effects of fixed broadband on economic growth in Africa

Abstract

PurposeThe study assesses the non-linear nexus between fixed broadband and economic growth. The study focuses on data from 33 African countries for the period 2010 to 2020.Design/methodology/approachThe empirical evidence is based on unit root tests, panel smooth transition regression and the generalized method of moments.FindingsThe following findings are established in this study. (1) The proportion of the population with access to electricity above and below which the relationship between fixed broadband and economic growth changes in sign is about 60%. (2) Below this threshold, each 1% increase in fixed broadband subscriptions induces a decline in economic growth of about 2.58%. Above the threshold, economic growth would increase by 2.43% when fixed broadband subscriptions increase by 1%. Sensitivity analyses and generalized method of moments (GMM) estimation show that these results are robust.Practical implicationsDue to the coronavirus disease (COVID-19) pandemic, which requires countries to take adequate measures to curb the spread of the pandemic, especially by means of virtual economic activities, any national policy aiming at improving the access of populations to high levels of fixed broadband services should be preceded by the implementation of an electrification program for at least 60% of the total population. Otherwise, providing a good quality internet connection for the benefit of the population would not produce the expected effects on economic growth and would, therefore, be counterproductive.Originality/valueThis study complements the extant literature by providing thresholds at which fixed broadband affects economic growth.