The Internet and Autocracy: Unpacking the Effects of Internet Freedom

Abstract

Previous work has demonstrated the importance of entrepreneurship and economic freedom in encouraging economic growth. However, the conditions under which societies tend to liberalize their economies toward business friendly environments have yet to be established and therefore merit further study. Using cross-sectional, time-series data, this paper finds a robust, positive relationship between Internet usage and the ease of doing business within countries. Moreover, this effect is particularly strong in countries with lower levels of democracy. Because the relationship between Internet usage and the ease of doing business is dynamic and theoretically endogenous, a Difference GMM approach is used to isolate the exogenous effects of Internet use by businesses. Given the increasing prevalence of information and communication technologies (ICTs) throughout the world, a robust relationship between Internet use and the ease of doing business suggests that the ease of doing business will continue to improve in the future.