May 14, 2007
How mobile phones promote economic growth
How do mobile phones promote economic growth? Robert Jensen for The Economist, describes how mobiles helped the Kerala fishermen increase incomes and pay for the phones. [via Emergic]
Fishermen's profits rose by 8% on average and consumer prices fell by 4% on average. Higher profits meant the phones typically paid for themselves within two months. And the benefits are enduring, rather than one-off. All of this, says Mr Jensen, shows the importance of the free flow of information to ensure that markets work efficiently. Information makes markets work, and markets improve welfare, he concludes.
... One criticism levelled at such studies, says Mr Waverman, is that it is difficult to tell if mobile phones are promoting growth, or growth is promoting the adoption of mobile phones, as people become able to afford them.
But detailed analyses of micro-market data like Mr Jensen's, he says, show how phones really do make people better off.
Furthermore, says Mr Jensen, phones do this without the need for government intervention. Mobile-phone networks are built by private companies, not governments or charities, and are economically self-sustaining.
Mobile operators build and run them because they make a profit doing so, and fishermen, carpenters and porters are willing to pay for the service because it increases their profits. The resulting welfare gains are indicated by the profitability of both the operators and their customers, he suggests.
All governments have to do is issue licences to operators, establish a clear and transparent regulatory framework and then wait for the phones to work their economic magic".
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