The Role of Governance in Teledensity and Economic Growth

Abstract

The objective of this chapter is to highlight the role played by governance in GDP growth and changes in telephone density in Sub-Saharan African (SSA) countries. The contribution of these two factors to aggregate output and telephone density is examined using the dynamic system GMM estimation that accounts for the endogeneity of GDP and telephone density. GMM estimations reveal that government effectiveness is positively associated with GDP growth, while political stability has a negative effect on telecommunications penetration. In addition, the estimations indicate that changes in telephone density have a positive effect on GDP growth. From a policy standpoint, the empirical model results suggest that telecommunications infrastructure-driven growth can be augmented if telecommunications infrastructure investment can generate a multiplier effect through job creation, both directly related and indirectly related to telecommunication infrastructure.