Academic journal article Journal of Southeast Asian Economies

Exploring the Nexus between ICT, Remittances and Economic Growth: A Study of Vietnam

Academic journal article Journal of Southeast Asian Economies

Exploring the Nexus between ICT, Remittances and Economic Growth: A Study of Vietnam

Article excerpt

I. Introduction

Information and communications technology (ICT) has been one of the cornerstones of growth in many developing countries, particularly due to its ability to support trade, capital flows, communications and mobile transfer services. Remittances are another interesting, albeit controversial, source of growth in developing and emerging economies. In this paper, we explore the nexus between ICT, remittances and income in Vietnam.

Vietnam is an emerging Southeast Asian economy that has experienced decent growth in ICT (Internet penetration) and remittance inflows over the last three decades. Notably, Internet use has superseded more traditional means of communications, such as telephones; relatively cheap Internet services are also readily available in Vietnam's provinces. Furthermore, current World Bank (2013a) data indicates that, in terms of remittance inflows, Vietnam is ranked eighth after India, China, Mexico, the Philippines, Pakistan, Bangladesh and Nigeria.

Against this backdrop, we estimate the short-run and long-run effects of ICT and remittances in Vietnam from 1980 to 2012. In addition, this paper examines the cointegration relationship using the augmented Solow framework (Solow 1956), with insights from growth pioneers (Schumpeter 1933; Domar 1952, 1961; Harrod 1959; Acemoglu 2009; Rao 2010), and the autoregressive distributed lag (ARDL) bounds procedure. We also examine the causality nexus between ICT and remittances. The rest of this paper is set out as follows: Section II provides a brief literature survey on remittances and ICT; section III discusses the paper's framework, the data and econometric method employed, and the estimated results; followed by concluding points in section IV.

II. Literature Survey

II.1 Information and Communications Technology (ICT)

Technology has enhanced productivity and growth (Solow 1956; Romer 1986, 1990; Katz 2009; Minghetti and Buhalis 2010) by lowering the cost of production, streamlining supply chain processes, providing access to information (therefore aiding consumers with decision-making) and providing quality products at competitive prices (Porter 2001; Buhalis and Law 2008). A large body of literature exploring the dynamism in technology expansion, which has proven to be indispensable in the growth and development process, has emerged over the last three decades.

Several studies, particularly those focussing on developed countries, have examined the effects of technology at various levels: firm-industry; national; cross-country; and regional (Mody and Dahlman 1992; Indjikian and Siegel 2005). For instance, at the firm-industry level, Lehr and Lichtenberg (1999) examine firms in service industries in Canada and find that personal computers made a positive contribution to productivity growth. Stiroh (2002) investigates fifty-seven major industries in the United States and finds a strong link between ICT and productivity. Similarly, Brynjolfsson and Hitt (2003) conclude that firms which invested in computer technology are able to realize greater productivity (output per unit of input). (1)

Another strand of literature focuses on the technology-growth relationship using cross-country regression techniques. For instance, Madden and Savage (1998) examine a sample of twenty-seven Central and Eastern European (CEE) countries from 1990 to 1995 and find a positive relationship between investment in telecommunication infrastructure and economic growth. Similarly, Roller and Waverman (2001) use data on twenty-one Organisation for Economic Co-operation and Development (OECD) countries over a twenty-year period (1970-90) and conclude that a positive causal relationship exists between investment in telecommunication infrastructure and subsequent economic performance. Thompson and Garbacz (2007) examine a panel of ninety-three countries from 1995 to 2003 and find that high rates of telecommunication services improve the productive efficiency of the world as a whole and, particularly, in some subsets of low income countries. …

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