The Role of Telecommunications Infrastructure in Regional Economic Growth in China

Different from traditional infrastructures, telecommunications infrastructure has greater potential to lead "leapfrogging" development in the developing countries. This paper provides empirical evidence on the links between telecommunications infrastructure and regional economic growth in China. With a panel dataset of 29 regions of China for a 17-year period, 1986-2002, this paper uses a dynamic fixed effects model to investigate this relationship while controlling for a set of other variables including initial economic condition, fixed investment, employment, population growth, foreign direct investment. The results show that telecommunications infrastructure endowment is a key factor in explaining regional economic growth in China. The results are robust even when controlling for past levels of GDP per capita, lagged growth, and other factors. The results further indicate that the telecommunications investment is subject to diminishing returns, thus suggesting that regions at an earlier stage of development are likely to gain the most from investment in telecommunications infrastructure.