1. ICTs and Economic Growth
Session 4
“ICTs for Development” course
Aim – to understand how ICTs can help deliver economic growth
Objectives – participants will be able to:
- Explain key strategies and key foundations for economic growth in developing countries
- Explain the informational context of growth in developing countries
- Apply a model of ICT4D-enabled change to explain evidence on ICTs and economic growth
- Analyse evidence and draw conclusions on ICTs and growth at three levels: micro-economic, supply chain, and macro-economic

2. Life Expectancy vs. Income
4.1. Economic Growth as a Development Goal
Development originally understood mainly as economic growth
Criticisms mean supplemented by other goals, but remains foundational
ASK – what does this chart indicate about economic growth?
>Correlates quite well with other development indicators
>So a reasonable proxy for other development goals
Data source: WB 2017b

3. Routes to Economic Growth
Value
Value Added
a) Economy ↑
b) Efficiency↑
c) Profitability↑
Inputs
Outputs
Process
d) Upgrading
New Process
e) Restructuring (New Sector)
Understand economic growth as total value of goods and services produced.
From this, five ways to bring about economic growth.
Summarise economy, efficiency, profitability, upgrading, restructuring from Section 4.1.
Make links of a) to e) to micro, meso and macro levels as per text at end of Section 4.1.

4. Typical Enterprise Value Chain
Purchasing
Operations
Sales
Administration
4.2. ICTs and Micro-Economic Growth
Start with overall value chain: all those things which happen within an enterprise that add value in converting inputs into outputs.
This is Porter’s model but too complex, so simplify down. ++
Revised model has four processes.
Summarise from text in Section 4.2: purchasing, operations, sales, administration.
All involve information-based decisions, so can apply CIPSODAR model.
Adapted from Laudon & Laudon 2016; itself developed from Porter 1985

5. CIPSODAR Model of Key Enterprise Processes
Developing Countries
Absence of Information
Poor Quality of Information
Uncertainty of Information
Asymmetry of Information
Cost of Information
Data
(capture, input, process, store)
Learning
Information
(output)
Knowledge
Decision
Action
-Purchasing
-Operations
-Sales
-Admin.
Results
(economic growth)
Can now see the connection: information -> value processes -> economic growth.
But CIPSODAR typically has problems in developing countries.
Summarise five information failures (use Section 4.2 text):
- absence of information
- poor quality of information
- uncertainty of information
- asymmetry of information
- cost of information
EXERCISE
Read text in Section 4.2 on information needed for transactions and on information failures.
- Identify the information needed by you to complete a recent transaction.
- Identify an example of an information failure in a recent transaction.
>Discuss examples of information failure, and identify potential of ICTs to address such failures

6. Levels of ICT-Enabled Change
Structure
System
Technology
Processes
Agency (Motivation and Capacity)
Content
Digitise
Improve
Reorganise
Transform
To understand how ICTs can address information and other failures and facilitate economic growth, need a model of roles of ICT in enterprise.
Introduce “DIRT” model and explain four levels of change from Section 4.2 text:
- Digitise
- Improve
- Reorganise
- Transform
Digitisation
ASK – years ago, if you needed to ask your customer a question, or ask the local doctor or vet a question, how would you do that?
>Physical journeys
ASK - what would be the costs of a physical journey?
>Direct cost (financial)
>Opportunity cost (e.g. lost income)
>Risk cost (e.g. accident, robbery)

7. Journey Substitution Savings
Farmers and rural entrepreneurs in Niger would, an average, require a three-hour round trip to the nearest main market. Substituting that with a phone call in order to gather information would save around 300 CFA (US$0.5) (Aker & Mbiti 2010).
Smallholder farmers in Malawi were estimated to save an average of US$1 per purchase/sales transaction as a result of using ICTs (in this case, an online trading platform, with savings calculated in terms of both time and transport) (Katengeza et al 2014).
Micro-entrepreneurs in Nigeria typically spent up to N250 (US$1.25) on a phone call but saved N1,000 (US$5) on the typical cost of a taxi journey; a net saving of US$3.75 (Jagun et al 2008).
ASK - what role for ICTs in addressing the costs of a physical journey?
>Can save all three types of cost (though risk and opportunity cost rarely measured).
>Benefits are incremental not transformative.
Digital Improvement
EXERCISE
Read Box 4.3 in textbook, and discuss: what were the key benefits when the fishermen started to use mobile phones?
>Higher income for mobile users and non-users
>Less waste
>Lower prices
>Address information failure e.g. absence and asymmetry
Many projects have tried to repeat using ICTs to address information failures of absence and asymmetry by providing market prices.

8. Impact of Price Information Systems
7-10% increase in price for maize and groundnuts (Courtois & Subervie 2015).
Design-Reality Gaps
Trust
Middlemen
Broader Impact
- Production mix
No difference in price for ICT-using and non-ICT using farmers (Fafchamps & Minten 2012). ?
Impact of price information on income and sales of potato farmers was “statistically indistinguishable from zero” (Mitra et al 2015).
ASK – what is the evidence of impact of providing market price information through ICTs?
>Mixed, with evidence of no effect as well as some effect. ++
Why should that be?
- Design-reality gaps: design assumption of disembedding prices from social context; reality of issues of trust and social relations with buyers or intermediaries.
- Broader impact e.g. farmers change what they grow rather than getting higher prices.

9. Enterprise Reorganisation
Digital Reorganisation
Reorganisation as moving from non-participation to participation in various aspects of enterprise.
Summarise four changes from Section text, and summarise impact of ICT on reorganisation.
Later, after use of slide 10:
ASK – what drives people to start an enterprise or start selling outputs?
>Show ICTs have limited role to play.
Then move to slide 11.
Image sources:

10. Reflections on ICTs and Micro-Economic Growth
Limited Change
Risk/Reward Ladder
Drivers to Change
Reflection
Summarise three key reflections from Section 4.2.4: limited change inc. transformation; risk/reward ladder; drivers to change
Then return to slide 9

11. Impact of ICT on Price Dispersion
Variation in fish prices across different markets in South Kerala fell from 65% to 15% (Jensen 2007).
Price variations across grain markets in Niger fell by 10% with introduction of mobile phones (Aker 2010).
Use of the Reuters Mobile Light price information app led price dispersion of crops across different rural markets in India to fall by 12% compared to just presence of mobiles alone (Parker et al 2015).
4.3. ICTs and Meso-Economic Growth
Understand mainly in terms of ICTs and supply chains.
Digitisation
Already discussed in relation to journey substitution within supply chains.
Digital Improvement
Reduction of waste in supply chains.
Also impacts price dispersion:
ASK – what impact seen?
>Price dispersion falls.
>Less chance of profiteering; less risk/more certainty for consumers.

12. Mobiles and Cloth-Weaving Supply Chain
Weaver
Concentric rings of ‘absolute’ geographic space
Thread Dealer
Indirect link via third-party
Inter-mediary
INTEGRATED STRUCTURE
NON- INTEGRATED STRUCTURE
No access to mobile telephony – communication accomplished by physical movement between locations
Access to mobile telephony – certain types of information communicated by phone.
Weaver/ Co-ord.
Master-Weaver
COORDINATED STRUCTURE
Sub-Weaver
Buyers
OUTSOURCED STRUCTURE
Physical move following call
Digital Reorganisation
Key ICT-linked reorganisation is disintermediation.
EXERCISE
Read Box 4.7 and identify impact of ICTs on digitisation, digital improvement and digital reorganisation.
>Digitisation: journey substitution, but with limits.
>Digital improvement: small effect only for a few weavers.
>Digital reorganisation: no disintermediation – strengthened intermediaries.
Reflection
Conclusion in relation to DIRT: some D and a bit of I, but no clear sign of R or T changes; but may see as ICTs diffuse more.
Source: Jagun et al 2008

13. Internet Usage vs. Gross National Income
4.4. ICTs and Macro-Economic Growth
EXERCISE
What factors do the graphs at the start of Section 4.4 show as related, and why are they related?
>ICTs and wealth are correlated.
>But graphs say nothing about causation: summarise different possible causations from Section 4.4 text.
Data source: WB 2017b

14. ICTs as a Cause of Economic Growth
“10 more mobile phones per 100 people would increase GDP per capita growth by up to 0.6 percentage points” (Deloitte 2012:4).
“an increase in the broadband penetration rate by 10 percentage points raised annual growth in per capita GDP by percentage points” (Czernich et al 2011:530).
Some causal link from ICTs to economic growth.

15. Where is ICTs’ Economic Impact Greater?
ASK
Would you expect ICTs to have a bigger or smaller impact on macro-economic growth in developing countries compared to developed countries?
Vote on bigger or smaller.
Summarise factors for and against including evidence from Section 4.4. text: complementary inputs, critical mass, different cost equation, information failures.
Explain difference between intensive and extensive uses of ICTs (see Section 4.4. text).
Image source:

16. ICT Consumption/Application
Extensive Use of ICTs
Goods
Software
Infra- structure
Services
Content
ICT Consumption/Application
Retail
Higher Productivity Than Other Sectors
Millions Employed
c.3% of GDP (mid-income)
c.1.5% of GDP (low-income)
Double Digit Annual Growth
Overview of extensive / ICT or digital sector activity: summarise components from Section 4.4 text (goods, software, infrastructure, services, retail, content).
Summarise evidence from Section 4.4 for higher economic growth contribution.
Overall, good evidence of incremental contribution, but absence of evidence of transformational contribution.
Source: Heeks 2008e