Telecommunications and Regional Development: Evidence from the U.S. States

Abstract

During the past 20 years, advancements in telecommunications technologies have had a direct impact on firms, particularly in the service-related sectors, and the telecommunications infrastructure has become important to their production processes. These developments also have had an indirect effect on the overall economy of regions because of the externalities they generate. This article is an examination of the impact of telecommunications infrastructure on the service sectors’ output growth among the 48 contiguous U.S. states. The findings suggest that not every state receives the full benefits of its own telecommunications infrastructure. A state-by-state regression analysis shows the variation in returns on telecommunications investments across states. This variation may be due to the inefficient utilization of telecommunications infrastructure as a factor of production. Data envelopment analysis confirms that the states accruing significantly positive benefits are those in which businesses use the telecommunications infrastructure most efficiently.