Does the internet have an economic impact similar to that of railways on an economy?
There has been a lot of research by economic historians on how the arrival of railways boosts incomes in the surrounding areas. Dave Donaldson won the prestigious John Bates Clark medal earlier this year for his work on the impact of railway expansion on incomes in India during colonial rule.
Does the internet have a similar effect? A new paper by Jonas Hourt and Jonas Poulsen needs to be read by officials working on the Digital India project. The two economists use the gradual arrival of the internet in various parts of Africa to show that digital connectivity has positive effects. The loss of unskilled jobs is more than made up by the creation of skilled jobs. Even those who continue to hold unskilled jobs see their incomes rise. Firm-level data shows that as more firms are created, there is higher productivity and a rise in exports. In short, average incomes increase.
The pipes that carry digital packets in our times have the same effect that railway tracks had a century ago. More people need access to them.
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