The Impact of ICT on East Asian Economic Growth: Panel Estimation Approach
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The Impact of ICT on East Asian Economic Growth: Panel Estimation Approach Elsadig Musa Ahmed & Rahim Ridzuan
Received: 16 December 2011 / Accepted: 17 April 2012 # Springer Science+Business Media, LLC 2012
Abstract This paper tests the impact of information and communications technology (ICT) on economic growth for ASEAN5+3 countries consisting of Malaysia, Thailand, Singapore, Indonesia, Philippines, Japan, Korea and China using panel data set from 1975 to 2006. In this paper, we investigate the impact of ICT on economic growth (GDP) based on standard production function consisting of capital (CAP) and labour (LAB) (number of employment as proxy of human capital), as independent variables. Telecommunications investment (TELINT) is used as a proxy to gauge the contribution of ICT as new independent variable to output growth in ASEAN5+3 countries. The study divided the ASEAN5+3 countries into two groups: ASEAN5 and ASEAN5+3 countries. We employ panel data set using various test such as panel unit root test, panel cointegration, Hausman test and generalised least squares method in order to detect the relationship between the dependent variable (GDP) and independent variables (CAP, LAB and TELINT) for ASEAN5+3 countries. The existence of long-run relationship between GDP and factor of production (capital, labour and telecommunications investment) is proven from the panel cointegration test for ASEAN5. Based on fixed effect for model 1 (ASEAN5) and random effect for model 2 (ASEAN5+3), the paper found out that labour, capital and telecommunications investment have positive relationship towards GDP. Thus, the study concludes that ICT has played an important role as engine of growth for sustainable development in ASEAN5 and ASEAN5+3 countries. In this context, ASEAN leader should take this opportunity from the formation of ASEAN5+3
E. M. Ahmed (*) Economics Unit, Faculty of Business and Law, Multimedia University, 75450 Malacca City, Malaysia e-mail: [email protected] E. M. Ahmed e-mail: [email protected] R. Ridzuan Faculty of Business Management, Universiti Teknologi Mara, Malacca Campus, Malacca City, Malaysia e-mail: [email protected]
J Knowl Econ
to widen their cooperation with China, Japan and Korea throughout knowledge sharing especially in the area of ICT. Keywords ICT . Economic growth . Panel data . ASEAN5+3
Introduction The importance of technology to economic development has long been recognized. This may be especially true in information and communications technology (ICT), in which they offer the potential for increasing availability of information, new means of communications, re-organization of productive processes and improving efficiency in many different economic activities [26]. The importance of ICT use is becoming amplified by the process of economic globalization, which puts a premium on information and communications systems as the means to achieve linkages to international markets and global production networks [29]. ICT has been an important drive of growth and productivity since 1
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