The internet-growth link: An examination of studies with conflicting results and new evidence on the network effect

Abstract

Choi and Hoon Yi (2009), using panel data for 207 economies over the period 1990�2000, find that the Internet has significant positive effects on economic growth. Maurseth (2018), re-examining Choi and Yi's work with the dataset extended to 2015, produces the opposite results: the effect of the internet on growth is negative and significant. Motivated by this intriguing issue, this paper conducts a rigorous examination of the growth effect of the internet on growth in a special way. It first uncovers the problem that plagues the approach employed by the two studies. It then proposes a modified model, which overcomes this problem controls as far as possible the problems of endogeneity and omitted variable bias. The paper find solid evidence on the effect of internet penetration on growth and the existence of the network effect. That is, the growth effect of internet penetration in a given country increases as the size of its internet network expands. � 2019 Elsevier Ltd