DO INFORMATION AND COMMUNICATION TECHNOLOGIES FOSTER ECONOMIC GROWTH IN INDONESIA?
Keywords:
ICT development, Economic growth, ICT exports, ARDL bound test, Indonesia
Abstract
This paper investigates, using annual data from 1980 to 2014, whether adoption of information and communication technologies (ICT) fosters economic growth in Indonesia. We employ an Autoregressive Distributed Lag cointegration technique on an augmented neoclassical growth model. The empirical results indicate a positive effect of ICT development on economic growth in both the long-run and short-run. The other regressors, such as total factor productivity, human capital, and capital per worker, also positively affect economic growth. From a policy perspective, the Indonesian government should promote ICT development through greater investment.
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References
Ahmed, E.M., and Ridzuan, R. (2013). The Impact of ICT on East Asian Economic
Growth: Panel Estimation Approach. Journal of Knowledge Economy, 4, 540-555.
Aker, J. C., and Mbiti, I. M. (2010). Mobile Phones and Economic Development in
Africa. Journal of Economic Perspectives, 24, 207–232.
Atzeni, G.E., and Carboni, O.A. (2006). ICT Productivity and Firm Propensity to
Innovative Investment: Evidence from Italian Microdata. Information Economics
and Policy, 18, 139–156.
Avgerou, C., Hayes, N., and Rovere, R.L. (2016). Growth in ICT Uptake in
Developing Countries: New Users, New Uses, New Challenges. Journal of
Information Technology, 31, 329-333.
Baliamoune-Lutz, M. (2003). An Analysis of the Determinants and Effects of ICT
Diffusion in Developing Countries. Information Technology for Development, 10,
151-169.
Byrne, E., Nicholson, B., and Salem, F. (2011). Information and Communication
Technologies and the Millennium Development Goals. Information Technology
for Development, 17, 1-3.
Cardona, M., Kretschmer, T., and Strobel, T. (2013). ICT and Productivity:
Conclusions from the Empirical Literature. Information Economics and Policy,
25, 109–125.
Caselli, F., and Coleman, W.J. II. (2001). Cross-country Technology Diffusion: the
Case of Computers. American Economic Review, 91, 328-335.
Cette, G., Jacques M., and Yusuf K. (2005). ICT Diffusion and Potential Output
Growth. Economics Letters, 87, 231-234.
Chinn, Menzie D., and Fairlie, R.W. (2007). The Determinants of the Global Digital
Divide: A Cross-Country Analysis of Computer and Internet Penetration.
Oxford Economic Papers, 59, 16-44.
Commander, S., Harrison, R., and Menezes-Filho, N. (2011). ICT and Productivity
in Developing Countries: New Firm-Level Evidence from Brazil and India.
Review of Economics and Statistics, 93, 528–541.
Cortes, E.A., and Navarro, J.A. (2011). Do ICT influence economic growth and
human development in European Union Countries. International Advance in
Economic Research, 17, 28-44.
Cronin, F.J., Colleran, E.K., Herbet, P., and Lewitzky, S. (1993).Telecommunications
and Growth: The Contribution of Telecommunications Infrastructure
Investment to Aggregate and Sectoral Productivity. Telecommunications Policy,
17, 677–690.
Datta, A., and Agarwal, S. (2004). Telecommunication and Economic Growth: A
Panel Data Approach. Applied Economics, 36, 1649–1654.
Dewan, S., and Kraemer, K. (2000). Information Technology and Productivity:
Evidence from Country-Level Data. Management Science, 46, 548–562.
Dickey, D. A., and Fuller, W. A. (1979). Distribution of the Estimators for
Autoregressive Time Series with a Unit Root. Journal of the American Statistical
Association,, 74, 427-431.
Dimelis, S.P. and Papaioannou, S.K., (2010). FDI and ICT Effect on Productivity
Growth: A Comparative Analysis of Developing and Developed Countries.
The European Journal of Development Research, 22, 79-96.
Farkhanda, S. (2007). The ICT Environment, Financial Sector and Economic
Growth: A Cross-Country Analysis. Journal of Economic Studies, 34, 352-370.
Feenstra, Robert C., Robert I., and Timmer, M.P. (2015). The Next Generation of
the Penn World Table. American Economic Review, 105, 3150-82.
Gregory, A.W., and Hansen, B.E., (1996). Residual-Based Tests for Cointegration in
Models with Regime Shifts. Journal of Econometrics, 70, 99-126.
Gross, C. (2012). Explaining the (non-) Causality Between Energy and Economic
Growth in the U.S. – A Multivariate Sectoral Analysis. Energy Economics, 34, 489-
499.
Heeks, R. (2010). Do Information and Communication Technologies (ICTs)
Contribute to Development? Journal of International Development, 22, 625-640.
Hu, Q., and Quan, J. (2005). Evaluating the Impact of IT Investments on
Productivity: A Causal Analysis at Industry Level. International Journal of
Information Management, 25, 39–53.
Ishida, H. (2015). The Effect of ICT Development on Economic Growth and Energy
Consumption in Japan. Telematics and Informatics, 32, 79-88.
ITU., (2009). Measuring the Information Society: ICT Development Index. http://
www.itu.int/ITU-D/ict/publications/idi/2009/index.html.
ITU., (2018). Measuring the Information Society Report -2018, Volume 1.
Jorgenson, D. W., and Vu, K. M. (2016). The ICT Revolution, World Economic
Growth, and Policy Issues. Telecommunications Policy, 40, 383–397.
Katz, R.L. (2009). The Economic and Social Impact of Telecommunications Output.
Intereconomics, 44, 41-48.
Khuong, M.Vu. (2013). Information and Communication Technology (ICT) and
Singapore’s Economic Growth. Information Economics and Policy, 25, 284-300.
Koutroumpis, P. (2009). The Economic Impact of Broadband on Growth: A
Simultaneous Approach. Telecommunications Policy, 33, 471-485.
Kumar, R.R., Kumar,R.D., and Patel, A. (2015). Accounting for Telecommunications
Contribution to Economic Growth: A Study of Small Pacific Island State.
Telecommunications Policy, 39, 284–295.
Kumar, R.R., Stauvermann, P.S., and Samitas, A. (2016). The Effects of ICT on
Output per Worker: A Study of the Chinese Economy. Telecommunications
Policy, 40, 102-115.
Lam, Pun-lee., and Shiu, A. (2010). Economic Growth, Telecommunications
Development and Productivity Growth of The Telecommunications Sector:
Evidence Around the World. Telecommunication Policy, 34, 185-199.
Narayan, P.K, and Popp, S. (2010). A New Unit Root Test with Two Structural
Breaks in Level and Slope at Unknown Time. Journal of Applied Statistics, 37,
1425-1438.
Narayan, P.K. (2005). The Saving and Investment Nexus for China: Evidence from
Cointegration Tests. Applied Economics, 37, 1979–1990.
Niebel, T. (2018). ICT and Economic Growth – Comparing Developing, Emerging
and Developed Countries. World Development, 104, 197-211.
O’Mahony, M., and Vecchi, M. (2005). Quantifying the Impact of ICT Capital on
Output Growth: A Heterogeneous Dynamic Panel Approach. Economica, 72,
615–633.
Oulton, N. (2002). ICT and Productivity Growth in the UK. Oxford Review of
Economic Policy, 18, 363–379.
Park, S.R., Choi, D.Y., and Hong, P. (2015). Club Convergence and Factors of Digital
Divide Across Countries. Technological Forecasting and Social Change, 96, 92–100.
Pesaran, M.H., Shin,Y., and Smith, R. (2001). Bounds Testing Approaches to the
Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289–326.
Phillips, P.C.B., and Perron, P. (1988). Testing for a Unit Root in Time Series
Regression. Biometrika, 75, 335-346.
Rao, B.B. (2010). Estimates of the steady state growth rates for selected Asian
countries with an extended Solow model. Economic Modelling, 27, 46–53.
Rath, B.N. (2016). Does the Digital Divide Across Countries Lead to Convergence?
New International Evidence. Economic Modelling, 58, 75-82.
Roller, L.H. and Waverman, L. (2001). Telecommunications Infrastructure and
Economic Development: A Simultaneous Approach. American Economic Review, 91,
909- 923.
Shahram, S, and Woodside, J.M. (2017). Emerging Markets: The Impact of ICT on
the Economy and Society. Digital Policy, Regulation and Governance, 19, 383-396.
Sharma, S.S., Tobing, L., and Azwar, P. (2018). Understanding Indonesia’s
Macroeconomic Data: What Do We Know and What are the Implications?
Bulletin of Monetary Economics and Banking, 21, 217-250.
Sharma, S.S. and Syarifuddin, F. (2019). Determinants of Indonesia’s Income
Velocity of Money. Bulletin of Monetary Economics and Banking, 21, 323-342.
Shiu, A., Lam, P.-L. (2008). Causal Relationship Between Telecommunications and
Economic Growth in China and Its Regions. Regional Studies, 42, 705–718.
Solow, Robert. M. (1956). A Contribution To the Theory of Economic Growth. The
Quarterly Journal of Economics, 70, 65-94.
Venturini, F. (2009). The Long-run Impact of ICT. Empirical Economics, 37, 497-515.
World Bank. (2012). ICT for Greater Development Impact. Available at http://
documents.worldbank.org/curated/en/285841468337139224/ICT-forgreaterdevelopment-
impact-World-Bank-Group-Strategy-for-2012-2015.
Yousefi, A. (2011). The Impact of Information and Communication Technology
on Economic Growth: Evidence from Developed and Developing Countries.
Economics of Innovation and New Technology, 20, 581–596.
Growth: Panel Estimation Approach. Journal of Knowledge Economy, 4, 540-555.
Aker, J. C., and Mbiti, I. M. (2010). Mobile Phones and Economic Development in
Africa. Journal of Economic Perspectives, 24, 207–232.
Atzeni, G.E., and Carboni, O.A. (2006). ICT Productivity and Firm Propensity to
Innovative Investment: Evidence from Italian Microdata. Information Economics
and Policy, 18, 139–156.
Avgerou, C., Hayes, N., and Rovere, R.L. (2016). Growth in ICT Uptake in
Developing Countries: New Users, New Uses, New Challenges. Journal of
Information Technology, 31, 329-333.
Baliamoune-Lutz, M. (2003). An Analysis of the Determinants and Effects of ICT
Diffusion in Developing Countries. Information Technology for Development, 10,
151-169.
Byrne, E., Nicholson, B., and Salem, F. (2011). Information and Communication
Technologies and the Millennium Development Goals. Information Technology
for Development, 17, 1-3.
Cardona, M., Kretschmer, T., and Strobel, T. (2013). ICT and Productivity:
Conclusions from the Empirical Literature. Information Economics and Policy,
25, 109–125.
Caselli, F., and Coleman, W.J. II. (2001). Cross-country Technology Diffusion: the
Case of Computers. American Economic Review, 91, 328-335.
Cette, G., Jacques M., and Yusuf K. (2005). ICT Diffusion and Potential Output
Growth. Economics Letters, 87, 231-234.
Chinn, Menzie D., and Fairlie, R.W. (2007). The Determinants of the Global Digital
Divide: A Cross-Country Analysis of Computer and Internet Penetration.
Oxford Economic Papers, 59, 16-44.
Commander, S., Harrison, R., and Menezes-Filho, N. (2011). ICT and Productivity
in Developing Countries: New Firm-Level Evidence from Brazil and India.
Review of Economics and Statistics, 93, 528–541.
Cortes, E.A., and Navarro, J.A. (2011). Do ICT influence economic growth and
human development in European Union Countries. International Advance in
Economic Research, 17, 28-44.
Cronin, F.J., Colleran, E.K., Herbet, P., and Lewitzky, S. (1993).Telecommunications
and Growth: The Contribution of Telecommunications Infrastructure
Investment to Aggregate and Sectoral Productivity. Telecommunications Policy,
17, 677–690.
Datta, A., and Agarwal, S. (2004). Telecommunication and Economic Growth: A
Panel Data Approach. Applied Economics, 36, 1649–1654.
Dewan, S., and Kraemer, K. (2000). Information Technology and Productivity:
Evidence from Country-Level Data. Management Science, 46, 548–562.
Dickey, D. A., and Fuller, W. A. (1979). Distribution of the Estimators for
Autoregressive Time Series with a Unit Root. Journal of the American Statistical
Association,, 74, 427-431.
Dimelis, S.P. and Papaioannou, S.K., (2010). FDI and ICT Effect on Productivity
Growth: A Comparative Analysis of Developing and Developed Countries.
The European Journal of Development Research, 22, 79-96.
Farkhanda, S. (2007). The ICT Environment, Financial Sector and Economic
Growth: A Cross-Country Analysis. Journal of Economic Studies, 34, 352-370.
Feenstra, Robert C., Robert I., and Timmer, M.P. (2015). The Next Generation of
the Penn World Table. American Economic Review, 105, 3150-82.
Gregory, A.W., and Hansen, B.E., (1996). Residual-Based Tests for Cointegration in
Models with Regime Shifts. Journal of Econometrics, 70, 99-126.
Gross, C. (2012). Explaining the (non-) Causality Between Energy and Economic
Growth in the U.S. – A Multivariate Sectoral Analysis. Energy Economics, 34, 489-
499.
Heeks, R. (2010). Do Information and Communication Technologies (ICTs)
Contribute to Development? Journal of International Development, 22, 625-640.
Hu, Q., and Quan, J. (2005). Evaluating the Impact of IT Investments on
Productivity: A Causal Analysis at Industry Level. International Journal of
Information Management, 25, 39–53.
Ishida, H. (2015). The Effect of ICT Development on Economic Growth and Energy
Consumption in Japan. Telematics and Informatics, 32, 79-88.
ITU., (2009). Measuring the Information Society: ICT Development Index. http://
www.itu.int/ITU-D/ict/publications/idi/2009/index.html.
ITU., (2018). Measuring the Information Society Report -2018, Volume 1.
Jorgenson, D. W., and Vu, K. M. (2016). The ICT Revolution, World Economic
Growth, and Policy Issues. Telecommunications Policy, 40, 383–397.
Katz, R.L. (2009). The Economic and Social Impact of Telecommunications Output.
Intereconomics, 44, 41-48.
Khuong, M.Vu. (2013). Information and Communication Technology (ICT) and
Singapore’s Economic Growth. Information Economics and Policy, 25, 284-300.
Koutroumpis, P. (2009). The Economic Impact of Broadband on Growth: A
Simultaneous Approach. Telecommunications Policy, 33, 471-485.
Kumar, R.R., Kumar,R.D., and Patel, A. (2015). Accounting for Telecommunications
Contribution to Economic Growth: A Study of Small Pacific Island State.
Telecommunications Policy, 39, 284–295.
Kumar, R.R., Stauvermann, P.S., and Samitas, A. (2016). The Effects of ICT on
Output per Worker: A Study of the Chinese Economy. Telecommunications
Policy, 40, 102-115.
Lam, Pun-lee., and Shiu, A. (2010). Economic Growth, Telecommunications
Development and Productivity Growth of The Telecommunications Sector:
Evidence Around the World. Telecommunication Policy, 34, 185-199.
Narayan, P.K, and Popp, S. (2010). A New Unit Root Test with Two Structural
Breaks in Level and Slope at Unknown Time. Journal of Applied Statistics, 37,
1425-1438.
Narayan, P.K. (2005). The Saving and Investment Nexus for China: Evidence from
Cointegration Tests. Applied Economics, 37, 1979–1990.
Niebel, T. (2018). ICT and Economic Growth – Comparing Developing, Emerging
and Developed Countries. World Development, 104, 197-211.
O’Mahony, M., and Vecchi, M. (2005). Quantifying the Impact of ICT Capital on
Output Growth: A Heterogeneous Dynamic Panel Approach. Economica, 72,
615–633.
Oulton, N. (2002). ICT and Productivity Growth in the UK. Oxford Review of
Economic Policy, 18, 363–379.
Park, S.R., Choi, D.Y., and Hong, P. (2015). Club Convergence and Factors of Digital
Divide Across Countries. Technological Forecasting and Social Change, 96, 92–100.
Pesaran, M.H., Shin,Y., and Smith, R. (2001). Bounds Testing Approaches to the
Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289–326.
Phillips, P.C.B., and Perron, P. (1988). Testing for a Unit Root in Time Series
Regression. Biometrika, 75, 335-346.
Rao, B.B. (2010). Estimates of the steady state growth rates for selected Asian
countries with an extended Solow model. Economic Modelling, 27, 46–53.
Rath, B.N. (2016). Does the Digital Divide Across Countries Lead to Convergence?
New International Evidence. Economic Modelling, 58, 75-82.
Roller, L.H. and Waverman, L. (2001). Telecommunications Infrastructure and
Economic Development: A Simultaneous Approach. American Economic Review, 91,
909- 923.
Shahram, S, and Woodside, J.M. (2017). Emerging Markets: The Impact of ICT on
the Economy and Society. Digital Policy, Regulation and Governance, 19, 383-396.
Sharma, S.S., Tobing, L., and Azwar, P. (2018). Understanding Indonesia’s
Macroeconomic Data: What Do We Know and What are the Implications?
Bulletin of Monetary Economics and Banking, 21, 217-250.
Sharma, S.S. and Syarifuddin, F. (2019). Determinants of Indonesia’s Income
Velocity of Money. Bulletin of Monetary Economics and Banking, 21, 323-342.
Shiu, A., Lam, P.-L. (2008). Causal Relationship Between Telecommunications and
Economic Growth in China and Its Regions. Regional Studies, 42, 705–718.
Solow, Robert. M. (1956). A Contribution To the Theory of Economic Growth. The
Quarterly Journal of Economics, 70, 65-94.
Venturini, F. (2009). The Long-run Impact of ICT. Empirical Economics, 37, 497-515.
World Bank. (2012). ICT for Greater Development Impact. Available at http://
documents.worldbank.org/curated/en/285841468337139224/ICT-forgreaterdevelopment-
impact-World-Bank-Group-Strategy-for-2012-2015.
Yousefi, A. (2011). The Impact of Information and Communication Technology
on Economic Growth: Evidence from Developed and Developing Countries.
Economics of Innovation and New Technology, 20, 581–596.
Published
2019-04-30
How to Cite
Rath, B., & Hermawan, D. (2019). DO INFORMATION AND COMMUNICATION TECHNOLOGIES FOSTER ECONOMIC GROWTH IN INDONESIA?. Buletin Ekonomi Moneter Dan Perbankan, 22(1), 103 - 122. https://doi.org/10.21098/bemp.v22i1.1041
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
