The Economics of Innovation in the Telecommunications Industry

By John R. McNamara | Go to book overview

CHAPTER 11
Telecommunications and Productivity

It is frequently claimed that advances in telecommunications technology are transforming the way we perform our daily tasks at work and at home. Applications of microprocessors, satellites, fiber-optic cables and video systems are providing fast, inexpensive access to a wide variety of information that enables us to enjoy a higher quality of life while being more productive in the workplace. While these claims are quite plausible, it has proven exceptionally difficult to back them up with hard evidence, especially claims concerning the productivity gains due to the new telecommunications and computer technologies. The reason probably has to do with the infrastructure nature of telecommunications. Like roads and water supply systems, telecommunications networks indirectly increase many dimensions of economic productivity, but the particular mechanisms are complex and hard to measure, and the beneficial effects may be significant in some sectors of the economy but insignificant in others. The improved quality and reliability of modern telecommunications services, especially when these services are provided at lower cost, are likely to be difficult to recognize when analyzing statistics. Therefore, overall summary data on the effects of telecommunications on economic productivity are usually misleading.

Most governments of industrialized nations believe that an efficient telecommunications network is an important factor in economic growth, and a cursory examination of the positive relationship that exists between telecommunications infrastructure and economic progress in most countries seems to support this relationship, at least in the macroeconomic

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