Re-examining the effects of information and communication technology on economic growth

Information and Communication Technology (ICT) has transformed the way people communicate, interact, and use information for growth. This study uses a three-year panel of 91 countries to examine how mobile phones as ICT affect economic growth directly through the communication and information channel, and indirectly through the FinTech and financial inclusion channel. We derive these effects of mobile phones using the Structural Equation Modeling approach, controlling for time-invariant heterogeneity at the country level. The results are then compared with the estimates using the commonly adopted stepwise fixed-effects regressions. The results indicate that the direct effect of mobile phones is more pronounced than the indirect effect. Although mobile phones promote FinTech applications for payments and savings, expanded mobile phone coverage is negatively associated with financial inclusion in terms of formal credit. In contrast to the majority of empirical evidence showing limited impacts on developing Sub-Saharan Africa, we consistently document greater impacts on this region, suggesting greater benefits to be achieved from ICT investments. Our results remain robust across different measurements of financial inclusion and estimation methods.