Digital Infrastructure Expansion and Economic Growth in Asian Countries

Abstract

Over the past few years, broadband has become a crucial component of the digital infrastructure in countries worldwide. Despite its significance, the exploration of the relationship between broadband expansion and economic growth in Asian countries has been limited. This paper aims to address this gap by re-examining the broadband-growth nexus in Asian countries using the system generalized method of moments, a robust statistical technique. This method allows for the use of data characterized by heteroskedasticity and autocorrelation and employs instrumental variables to address endogeneity concerns. Our analysis indicates that broadband plays a substantial role in fostering economic growth in Asian countries. By leveraging the system's generalized method of moments, we ensure that our findings are not biased by potential endogeneity, providing a more accurate depiction of the impact of broadband on economic development. To further validate our results, we employ additional econometric techniques, including panel cointegration and panel fully modified ordinary least square methods, to estimate cointegration equations. These methodologies confirm the long-term equilibrium relationship between broadband penetration and economic growth. Furthermore, we apply the Panel Granger Causality test to substantiate the direction of causality between broadband expansion and economic growth. The results from this test corroborate our initial findings, reinforcing the role of broadband as a significant driver of economic development in the region. Based on these findings, we propose several policy recommendations to enhance the benefits of broadband technology in Asian countries. These include strategic steps for technology transfer, and ensuring that broadband infrastructure is efficiently planned and allocated to reach the broader population. By doing so, countries can harness the full potential of broadband technology, contributing to the creation of a digitally inclusive Asian region. Our study underscores the importance of broadband as a catalyst for economic growth and highlights the need for targeted policies to support its expansion. The insights provided can aid policymakers in formulating strategies to optimize the deployment of broadband technology, ultimately fostering sustainable economic development and improving the quality of life for citizens across Asia.