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Inside the ubiquitous broadband-GDP stat

October 24, 2011  »  Broadband & BusinessNo Comment

How many times have you read that a 10% increase in broadband penetration brings a 1.4% boost to GDP in developing nations? Once per month sounds about right.

world bank broadband on gdp

Estimates of the actual magnitude of broadband impact on GDP vary.

Just one caveat: officially, that 1.4% could be as little as 0.24% or as high as 1.50%. In reality, the percentage is impossible to pin down. The popular 1.38% comes from a 2009 global ICT study co-authored by Christine Zhen-Wei Qiang, an economist at the World Bank. A few minutes of digging through the report shows the statistically valid result is based on average broadband penetration for middle- and low-income countries between 1980 and 2006. The question remains – does such a result hold true in Africa, and if so, from the year 2011 and beyond?

Plus, what if a 10% increase in broadband results in a 2-3% increase in GDP instead of only 1%? Although a GDP range of 1% seems small, even the smallest African economies are generating around US $1 billion in net GDP. The margin of error is in the tens of millions of dollars.

Analysts are quick to point out the need for complementary investments or policies in other sectors in order to utilize the benefits of broadband. Some extremely under-developed areas need low-tech solutions, however. Broadband may not contribute much to basic needs, and consequently GDP, in these places. For example, broadband can provide tele-medicine, but it cannot directly bring basic medical supplies (although it can shorten the supply-chain).

Additional notes regarding the possible GDP benefits from a 10% increase in broadband penetration:

  • Internet alone (vs. broadband) brings 1.12% increase in GDP in developing nations
  • the 0.24% to 0.26% range is based on Germany
  • 0.60% to 0.70% is based on 5 non-African nations from 2003-2004
  • 1.10% is based on mobile broadband in India
  • 0.90% to 1.50% is based on OECD countries
  • Dial-up and broadband in China will potentially contribute 2.5% to GDP growth
  • Wireless broadband should increase South Africa’s GDP by 1.8% by 2015

Data: Broadband Strategies Handbook, The World Bank / infoDev, 3-5.