Mobile phones help development

By Tim Worstall | 16 March 2005

The current issue of The Economist reports on how competitive markets for mobile telephony can boost economic growth in poor countries.

A functioning telecoms network enables information to be spread more quickly - so that a seller doesn't need to walk three miles to bargin with a buyer. That's good for trade and good for economic growth. Mobile networks are enabling it to leap-frog creating a universal land-line network.

A paper by Waverman, Meschi and Fess looks at the effect of growth in mobile usage and the effect on GDP growth. A rise of 10 phones per 100 people leads to a 0.6 percentage point increase in GDP growth. That such an effect exists is no surprise, for Waverman did similar research into land lines in the rich world in the 70s and 80s with a similar result.

The report also points out that markets with competing suppliers have higher usage rates than those with monopolies. DR Congo has two phones per 100 people, Ethiopia 0.13, there are six providers in the former and one in the latter (the two countries have similar incomes, $100 per capita a year).

The Economist says that: "Instead of messing around with telecentres and infrastructure projects of dubious merit, the best thing governments in the developing world can do is to liberalise their telecoms markets, doing away with lumbering state monopolies and encouraging competition."