The Role of Openness in the Effect of ICT on Governance

Asongu, Simplice and Nwachukwu, Jacinta (2017): The Role of Openness in the Effect of ICT on Governance. Forthcoming in: Information Technology for Development

Abstract

The study investigates how openness influences information and communication technology (ICT) penetration for improved government quality in sub-Saharan Africa for the period 2000-2012. Openness is measured in terms of trade and financial globalisation whereas ICT is proxied with mobile phone and internet penetration rates. Ten bundled and unbundled governance indicators are used. The empirical evidence is based on Generalised Method of Moments with forward orthogonal deviations. The main findings are: First, financial openness has an edge over trade openness when combined with ICT to affect both economic and institutional governance. Second, mobile phones have an edge over internet penetration in complementing (i) trade openness for economic governance and (ii) financial openness for institutional governance. Third, net effects on political governance are consistently negative. Taken together, in the short-run, openness-driven ICT policies are more rewarding in terms of economic and institutional governance than political governance. Fourth, catch-up in governance is facilitated by the interaction between openness and ICT. Contributions of these findings to literature are discussed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Openness; ICT; Governance; Africa
• Subjects: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F40 - General; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O38 - Government Policy; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa; P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P37 - Legal Institutions ; Illegal Behavior

References

Amavilah, A., Asongu, S. A., & Andrés, A. R., (2014). “Globalization, Peace & Stability, Governance, and Knowledge Economy”, African Governance and Development Institute Working Paper No. 14/012, Yaoundé.

Andrés, R. A, Asongu, S. A., Amavilah, V. H., (2015). “The Impact of Formal Institutions on Knowledge Economy”, Journal of the Knowledge Economy, 6(4), pp. 682-703.

Anyanwu, J. C., (2012). “Developing Knowledge for the Economic Advancement of Africa”, International Journal of Academic Research in Economics and Management Sciences, 1(2), pp. 73-111.

Anyanwu, J., & Erhijakpor, A., (2014). “Does Oil Wealth Affect Democracy in Africa?”African Development Review, 26 (1), pp. 15-37.

Arellano, M., & Bond, S., (1991), “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations” The Review of Economic Studies, 58(2), pp. 277-297.

Arellano, M., & Bover, O., (1995), “Another look at the instrumental variable estimation of error components models”, Journal of Econometrics, 68(1), pp. 29-52.

Asiedu, E., (2014). “Does Foreign Aid in Education Promote Economic Growth? Evidence From Sub-Saharan Africa”, Journal of African Development, 16(1), pp. 37-59.

Asongu, S. A., (2013). “How has mobile phone penetration stimulated financial development in Africa”, Journal of African Business, 14(1), pp. 7-18.

Asongu, S. A., (2014a). “Globalization, (fighting) corruption and development: how are these phenomena linearly and nonlinearly related in wealth effect?, Journal of Economic Studies, 41(3), pp. 346-369.

Asongu, S. A., (2014b). “African development: beyond income convergence”, South African Journal of Economics, 83(3), pp. 334-353.

Asongu, S. A., (2017a). “Conditional Determinants of Mobile Phones Penetration and Mobile Banking in Sub-Saharan Africa”, Journal of the Knowledge Economy. DOI: 10.1007%2Fs13132-015-0322-z

Asongu, S. A., (2017b). “Knowledge Economy Gaps, Policy Syndromes and Catch-Up Strategies: Fresh South Korean Lessons to Africa”, Journal of the Knowledge Economy, 8(1), pp. 211–253.

Asongu, S. A., (2015). “The impact of mobile phone penetration on African inequality”, International Journal of Social Economics, 42(8), pp. 706-716.

Asongu, S. A., (2016). “Determinants of Growth in Fast Developing Countries: Evidence from Bundling and Unbundling Institutions”, Politics & Policy, 44(1), pp. 97-134.

Asongu, S. A., Batuo, E., & Tchamyou, S. V., (2016). “Bundling Governance: Finance versus Institutions in Private Investment Promotion”, African Governance and Development Institute Working Paper No. 15/051, Yaoundé.

Asongu, S. A., & De Moor, L., (2015). “Recent advances in finance for inclusive development: a survey”, African Governance and Development Institute Working Paper No. 15/005, Yaoundé.

Asongu, S. A., & De Moor, L., (2017). “Financial globalisation dynamic thresholds for financial development: evidence from Africa”, The European Journal of Development 29(1), pp. 192–212.

Asongu, S. A., & Nwachukwu, J., (2016a). “Revolution empirics: predicting the Arab Spring” Empirical Economics, 51(2), pp. 439-482.

Asongu, S. A., & Nwachukwu, J., (2016b). “Foreign aid and governance in Africa”, International Review of Applied Economics, 30(1), pp. 69-88.

Asongu, S. A., & Nwachukwu, J., (2016c). “The Role of Lifelong Learning in Political Stability and Non-Violence: Evidence from Africa”, Journal of Economic Studies, 43(1), pp. 141-164.

Asongu, S. A., & Ssozi, J., (2016). “Sino-African Relations: Some Solutions and Strategies to the Policy Syndromes”, Journal of African Business, 17(1), pp. 33-51.

Ba, J., & Ng S (2006). “Confidence intervals for diffusion index forecasts and inference for factor-augmented regression”, Econometrica, 74(4), pp. 1133-1150.

Bai, J., (2003). “Inferential theory for factor models of large dimensions”. Econometrica, 71 (1),pp.135-173.

Bai, J., (2009). “Panel data models with interactive fixed effects”. Econometrica, 77(4), pp. 1229-1279.

Baltagi, B. H., (2008). “Forecasting with panel data”, Journal of Forecasting, 27(2), pp. 153-173.

Barro, R., (1991). “Economic Growth in a Cross Section of Countries”. Quarterly Journal of Economics 196 (2/May), pp. 407–443.

Barro, R. J., & Sala-i-Martin, X., (1992). “Convergence”, Journal of Political Economy, 100(2), pp. 223-251.

Barro, R. J., & Sala-i-Martin, X., (1995). Economic Growth. The MIT Press, Cambridge, MA.

Baumol, W. J., (1986). “Productivity, growth, convergence and welfare: what the long run data show”, American Economic Review, 76(5), pp. 1072-1085.

Bonaglia, F., Braga de Macedo, J., & Bussolo M., (2001). “How globalization improves governance”. Working Paper No. 181. OECD Development Center. November.

Bond, S., Hoeffler, A., & Tample, J. (2001) “GMM Estimation of Empirical Growth Models”, University of Oxford.

Boulianne, S., (2009). “Does Internet Use Affect Engagement? A Meta-Analysis of Research”, Political Communication, 26(2), pp. 193-211.

Blundell, R., & Bond, S., (1998). “Initial conditions and moment restrictions in dynamic panel data models” Journal of Econometrics, 87(1), pp. 115-143.

Brambor, T., Clark, W. M., & Golder, M., (2006). “Understanding Interaction Models:Improving Empirical Analyses”, Political Analysis, 14 (1), pp. 63-82.

Breuer, A., Landmann, T., & Farquhar, D., (2012). “Social media and protest mobilization: evidence from the Tunisian revolution”, Democratization, 22(4), pp. 764-792.

Bruno, G., De Bonis, R., & Silvestrini, A., (2012). “Do financial systems converge? New evidence from financial assets in OECD countries”. Journal of Comparative Economics; 40(1), pp. 141-155.

Carmody, P., (2013). “A knowledge economy or an information society in Africa? Thintegration and the mobile phone revolution”, Information Technology for Development, 19(1), pp. 24-39.

Byrne, E., Nicholson, B., & Salem, F., (2011). “Information communication technologies and the millennium development goals”, Information Technology for Development, 17(1), pp. 1-3.

Chavula, H. K., (2013). “Telecommunications development and economic growth in Africa”, Information Technology for Development, 19(1), pp. 5-23.

Cheung, H. Y., & Chan. A. W. H., (2008). “Corruption Across Countries; Impacts form Education and Cultural Dimensions.”, The Social Science Journal, 45 (2), pp. 223-239.

Claus, I., & Grimes, A., (2003). “Asymmetric Information, Financial Intermediation and the Monetary Transmission Mechanism: A Critical Review”, NZ Treasury Working Paper No. 13/019, Wellington.

Dewan, S., & Ramaprasad, J., (2014). “Social media, traditional media and music sales”, MIS Quarterly, 38(1), pp. 101-128.

Diamond, L., (2010). “Liberation Technology”, Journal of Democracy, 21(3), pp. 69-83.

Dixit, A., (2009). “Governance Institutions and Economic Activity”, American Economic Review, 99(1), pp. 5-24.

Efobi, U., (2015). “Politicians’ Attributes and Institutional Quality in Africa: A Focus on Corruption”, Journal of Economic Issues, 49(3), pp. 787-813.

Fonchingong, C., (2014). “Firming Up Institutional Policy for Deprived Elderly in Cameroon”, Politics & Policy, 42(6), pp. 948-980.

Fosu, A., (2013a), “Growth of African Economies: Productivity, Policy Syndromes and the Importance of Institutions” Journal of African Economies, 22(4), pp. 523-551.

Fosu, A., (2013b). “Growth of African Economies: Productivity, Policy Syndromes and the Importance of Institutions” Journal of African Economies 22(4), pp. 523-551.

Fosu, A. K., (2015a). “Growth, Inequality and Poverty in Sub-Saharan Africa: Recent Progress in a Global Context”, Oxford Development Studies, 43(1), pp. 44-59.

Fosu, A., (2015b). Growth and Institutions in African Development, First edited by Augustin K. Fosu, , Routledge Studies in Development Economics: New York

Fosu, A., (2015c). Growth and institutions in African Development, in Growth and Institutions in African Development, First edited by Augustin K. Fosu, 2015, Chapter 1, pp. 1-17, Routledge Studies in Development Economics: New York.

Fukuyama, F., (2013). “What is Governance?”, Governance, 26(3), pp. 347-368.

Fung, M. K., (2009). “Financial development and economic growth: convergence or divergence?”. Journal of International Money and Finance, 28(1), pp.56-67.

Gagliardone, I., (2015). “‘Can you hear me?’ Mobile–radio interactions and governance in Africa”, new media and society, doi: 10.1177/1461444815581148.

Gani, A., (2011). “Governance and Growth in Developing Countries”, Journal of Economic Issues, 45(1), pp. 19-40.

Goredema, C, (2009). “Recovery of proceeds of crime: observations on prac¬tical challenges in Sub-Saharan Africa.” In Basel Institute on Governance, Tracing Stolen Assets: A Practitioner’s Handbook. Available at: http://www. baselgovernance.org/fileadmin/docs/publications/books/asset-tracing_web-version.pdf (06-26-14)

Greenaway-McGrevy, R., Han, C., & Sul, D., (2012). “Asymptotic distribution of factor aug- mented estimators for panel regression”. Journal of Econometrics, 169 (1), pp. 48-53.

Grossman, G., Humphreys, M., and Sacramone-Lutz, G., (2014). ““I wld like u WMP to extend electricity 2 our village”: On Information Technology and Interest Articulation”, American Political Science Review, 108(3), pp. 688-705.

Hellstrom, J. (2008 ), “Mobile phones for good governance– challenges and way forward”, Stockholm University / UPGRAID, http://www.w3.org/2008/10/MW4D_WS/papers/hellstrom_gov.pdf (Accessed: 22/11/2015).

Jolliffe, I. T. (2002) Principal Component Analysis (2nd Ed.) New York: Springer.

Kaffenberger, M., (2012). “The effect of educational attainment on corruption participation in sub-Saharan Africa”, Graduate School of Vanderbilt University.

Kaiser, H. F. (1974) “An index of factorial simplicity” Psychometrika, 39(1), pp. 31–36.

Kamel, S., (2005). “The use of information technology to transform the banking sector in developing nations”, Information Technology for Development, 11(4), pp. 305-312.

Kaufmann, D., Kraay, A., & Mastruzzi, M., (2007a). “Growth and Governance: A Reply”, Journal of Politics, 69(2), pp. 555-562.

Kaufmann, D., Kraay, A., & Mastruzzi, M., (2007b). “Growth and Governance: A Rejoinder”, Journal of Politics, 69(2), pp. 570-572.

Kaufmann, D., Kraay, A & Mastruzzi, M., (2010). “The worldwide governance indicators: Methodology and analytical Issues”. World Bank Policy Research Working Paper No 5430, Washington.

Kivuneki, F. N., Ekenberg, L., Danielson, M., & Tusubira. F.F., (2011). “Perceptions of the role of ICT on quality of life in rural communities in Uganda”, Information Technology for Development, 21(1), pp. 61-80.

Klitgaard, R., (1988). Controlling Corruption, University of California Press, Berkeley and London.

Kuada, J., (2015). Private Enterprise-Led Economic Development in Sub-Saharan Africa The Human Side of Growth First edition by Kuada, J, Palgrave Macmillan: New York.

Kurtz, M., & Schrank, A., (2007a). “Growth and Governance: Models, Measures, and Mechanisms”, Journal of Politics, 69(2), pp. 538-554.

Kurtz, M., & Schrank, A., (2007b). “Growth and Governance: A Defense”, Journal of Politics, 69(2), pp. 563-569.

Lalountas, D. A., Manolas, G.A., & Vavouras, I.S., (2011), “ Corruption, globalization and development: How are these three phenomena related?”, Journal of Policy Modeling, 33, pp.636-648.

Lederman, D., Loayza, N. V., & Soares, R. R., (2005). “Accountability and Corruption: Political Institutions Matter”, Economics & Politics, 7(1), pp. 1-35.

Levendis, J., & Lee, S. H., (2013). “On the endogeneity of telecommunications and economic growth: evidence from Asia”, Information Technology for Development, 19(1), pp. 62-85.

Love, I., & Zicchino, L., (2006). “Financial Development and Dynamic Investment Behaviour: Evidence from Panel VAR” .The Quarterly Review of Economics and Finance, 46(2), pp. 190-210.

Manacorda, M., & Tesei, A., (2016). “Liberation Technology: Mobile Phones and Political Mobilization in Africa”, Queen Mary University of London, http://personal.lse.ac.uk/manacorm/liberation_technology.pdf (Accessed: 24/05/2016).

Mankiw, N. G., Romer, D., & Weil, D. N., (1992). “A contribution to the empirics of economic growth”, Quarterly Journal of Economics, 107(May), pp. 407–437.

Matthias, M., (2012). “Connectivity and Accountability in Africa”, The Futurist, 46(1), pp. 6-7.

Mayer-Foulkes, D., (2010). “Divergences and Convergences in Human Development”. UNDP Human Development Research Paper 2010/20, Paris.

McKenzie C, R., & McAleer M (1997). “On efficient estimation and correct inference in models with generated regressors: A general approach.” Japanese Economic Review, 48(4), pp. 368-389.

McMillan, M,S., (2013). “The Changing Structure of Africa’s Economies.” Background Paper for African Economic Outlook 2013. African Development Bank, OECD Development Center, and United Nations Development Program. Revised version available at: http://legacy.wlu.ca/documents/57803/McMil¬lian_ChangingAfrica_140317.pdf (Accessed: 24/05/2016).

Michel, J., (2016). “Beyond Aid: the Integration of Sustainable Development in a Coherent International Agenda”, Centre for International Private Enterprises, http://www.cipe.org/publications/detail/beyond-aid-integration-sustainable-development-coherent-international-agenda (Accessed: 19/07/2016).

Mocan, N., (2008). “What Determines Corruption? International Evidence from Microdata.” Economic Inquiry, 46 (4), pp. 493-510.

Mpogole, H., Usanga, H., & Tedre, M., (2008). “Mobile phones and poverty alleviation: a survey study in rural Tanzania”, Proceedings of M4D 2008, Karlstad University, Sweden, pp. 62-72.

Narayan, P. K., Mishra, S., & Narayan, S., (2011). “Do market capitalization and stocks traded converge? New global evidence”, Journal of Banking and Finance, 35(10), pp. 2771-2781.

Okada, K., & Samreth, S.,(2012), “The effect of foreign aid on corruption: A quantile regression approach”, Economic Letters, 115(2), pp. 240-243.

Oluwatobi, S., Efobi, U.R., Olurinola, O.I., Alege, P. (2015), “Innovation in Africa: Why Institutions Matter”, South African Journal of Economics, 83(3), pp. 390-410.

Oxley L, & McAleer, M., (1993). “Econometric issues in macroeconomic models with generated regressors.” Journal of Economic Surveys, 7(1), pp. 1-40.

Pagan, A., (1984). “Econometric issues in the analysis of regressions with generated regressors” International Economic Review, 25(1), pp. 221-247.

Penard, T., Poussing, N., Yebe, G. Z., & Ella, P. N., (2012). “Comparing the Determinants of Internet and Cell Phone Use in Africa : Evidence from Gabon ”, Communications & Strategies, 86 (Second Quarter), pp. 65-83.

Pesaran, M. H., (2006). “Estimation and inference in large heterogeneous panels with a mul- tifactor error structure”. Econometrica 74 (4), pp. 967-1012.

Petrakis, P. E., & Stamatakis, D. (2002). “Growth and educational levels: a comparative analysis”. Economics of Education Review, 21 (2), pp. 513-521.

Pierskalla, J. H., & Hollenbach, F. M., (2013). “Technology and Collective Action: The Effect of Cell Phone Coverage on Political Violence in Africa”, American Political Science Review, 107(2), pp. 207-224.

Ponelis, S. R., & Holmner, M. A., ( 2013a). “ICT in Africa: Enabling a Better Life for All”, Information Technology for Development, 21(1), pp. 1-11.

Ponelis, S. R., & Holmner, M. A., ( 2013b). “ICT in Africa: Enabling a Better Life for All”, Information Technology for Development, 21(1), pp. 163-177.

Porter, G., Hampshire, K., Milner, J., Munthali, A., Robson, E., De Lannoy, A., Bango, A., Gunguluza, N., Mashiri, M., Tanle, A., and Abane, A., (2016). “Mobile Phones and Education in Sub-Saharan Africa: From Youth Practice to Public Policy”, Journal of International Development, 28(1), pp. 22-39.

Qureshi, S., (2013a). “What is the role of mobile phones in bringing about growth?”, Information Technology for Development, 19(1), pp. 1-4.

Qureshi, S., (2013b). “Networks of change, shifting power from institutions to people: how are innovations in the use of information and communication technology transforming development?” ?”, Information Technology for Development, 19(2), pp. 97-99.

Qureshi, S., (2013c). “Information and Communication Technologies in the Midst of Global Change: How do we Know When Development Takes Place?”, Information Technology for Development, 19(3), pp. 189-192.

Roodman, D., (2009a). “A Note on the Theme of Too Many Instruments”, Oxford Bulletin of Economics and Statistics, 71(1), pp. 135-158.

Roodman, D., (2009b). “How to do xtabond2: An introduction to difference and system GMM in Stata”, Stata Journal, 9(1), pp. 86-136.

Sayari, S., (1977). “Political Patronage in Turkey”, in E. Gellner and J. Waterbury (eds.), Patonsand Clients in Mediterranean Societies, London: Duckworth, pp. 103-113.

Scott, J. C., (1972). Comparative Political Corruption, Englewood Cliffs, NJ: Prentice-Hall.

Snow, B. C., (2009). “Mobile Phone Diffusion and Corruption in Africa”, Political Communication, 26(3), pp.333-353.

Solow, R. M., (1956). “A contribution to the theory of economic growth”, Quarterly Journal of Economics, 70(1), pp. 65-94.

Stock, J. H. & M. W. Watson (2002). “Forecasting using principal components from a large number of predictors”. Journal of the American Statistical Association, 97 (460), pp.1167-1179.

Suarez, S. L., (2006). “Mobile democracy: text messages, voter turnout and the 2004 Spanish general election”, Representation, 42(2), pp. 117-128.

Swan, T., (1956). “Economic growth and capital accumulation”. Economic Record, 32, pp. 334–361. http://onlinelibrary.wiley.com/doi/10.1111/saje.12100/abstract

Tchamyou, V. S., (2015). “The role of knowledge economy in African business”, African Governance and Development Institute Working Paper, No. 15/049, Yaoundé.

Tchamyou, V. S., & Asongu, S. A., (2017). “Information Sharing and Financial Sector Development in Africa”, Journal of African Business, 18(1), pp. 24-49.

Treisman, D., (2000).“ The causes of corruption: a cross-national study”, Journal of Public Economics, 76(3), pp. 399-457.

Truex, R., (2011). “Corruption, Attitudes, and Education: Survey Evidence from Nepal.” World Development, 39 (7), pp. 1133-42.

Tusalem, R. F., (2015), “State Regulation of Religion and the Quality of Governance”, Politics & Policy, 43(1), pp. 94-141.

Varese, F., (1997). “The Transition to the Market and Corruption in Post-socialist Russia”, Political Studies, 45(3), pp. 579-96.

Weidmann, J. N., & Shapiro, N. B., (2015). “Is the Phone Mightier Than the Sword? Cellphones and Insurgent Violence in Iraq”, International Organisation, 69(2), pp. 247-274.

Westerlund, J., & Urbain, J-P., (2013a). “On the estimation and inference in factor-augmented panel regressions with correlated loadings”, Economic Letters, 119(3), pp. 247-250.

Westerlund, J., & Urbain, J-P., (2013b). “On the implementation and use of factor-augmented regressions in panel data”, Journal of Asian Economics, 28(October), pp. 3-11.

Westerlund, J., & Urbain, J-P., (2012). “Cross-sectional averages versus principal components”, Maastricht University, RM/11/053, Maastricht.

Weyland, K., (1998). “The Politics of Corruption in Latin America”. Journal of Democracy, 9 (2), pp.108-121.

Wade, R., (1985). “The Market for Public Office: Why the Indian State is not better at Development.”, World Development, 13(4), pp. 467–97.

World Bank (2015). “World Development Indicators”, World Bank Publications http://www.gopa.de/fr/news/world-bank-release-world-development-indicators-2015 (Accessed: 25/04/2015).

Yerrabati, S., & Hawkes, D., (2015). “Economic Governance and Economic Growth in South and East Asia & Pacific Region: Evidence from Systematic Literature Reviews and Meta-analysis”. Advances in Economics and Business, 3(1), pp. 1 - 21.