Internet Connectivity and Economic Development

Across the world, two in 10 households have access to the Internet at home, according to a just-released Gallup survey. Internet access at home was far greater in more economically advanced countries: Nearly eight in 10 people (78 percent) in countries where gross domestic product (GDP) is more than $25,000 have Internet access at home. Home Internet access drops off steeply in less affluent, less developed nations, according to the Gallup survey, especially in countries with less than $10,000 in per capita GDP. The survey is based on telephone and face-to-face interviews with approximately 1,000 adults, aged 15 and older in 116 countries, and was conducted in 2009.

Internet Connectivity -- Zara Matheson, Martin Prosperity 
Institute -- photo.jpg
The map above, by Zara Matheson of the Martin Prosperity Institute, shows the percentage of households with Internet connectivity, highlighting the top 10.

The study notes the connection between home Internet connectivity and both urbanization and economic development. "Populations in the most connected countries also tend to be highly urbanized, reducing the cost of extending Internet delivery modes - whether phone and cable lines or wireless towers - to a high proportion of residents. Two of the most connected populations in the world - residents of Singapore and Hong Kong - are entirely urban," the study reports, adding that: "Internet access is clearly a function of economic development; as recent trends in China demonstrate, demand for electronics and online services grows as living standards rise along with disposable income levels."

Home Internet connectivity is indeed a function of economic development, as my analysis with Charlotta Mellander finds, but it is also related to the transition from industrial to post-industrial societies.

Source: World Development Indicators for 2006.

Home Internet connectivity is closely associated with economic output measured as gross regional product per capita according to our analysis, with a correlation of .89. It is also closely correlated with total factor productivity (.87), the UN Human Development Index (.84), and the Global Competitiveness Index (.84) - various measures of the level and extent of economic development.

Source: World Development Indicators for 2006, calculations by Charlotta Mellander.

But other factors also appear to be at play. It is not just the level of economic development that matters, but its nature and type, notably the transition from older, industrial-style economies and societies to newer, post-industrial ones, as I noted in a previous post. Post-industrial economies are distinguished by more highly educated populations or higher human capital levels; higher levels of knowledge-based, professional, and creative class jobs; higher levels of innovation and R&D; higher levels of entrepreneurship and business formation; and a shift toward more open-minded and tolerant values - what Ronald Inglehart has dubbed "post-materialist values." My recent research with Charlotta Mellander and Jason Rentfrow finds evidence that post-industrial socioeconomic structures and post-materialist values matter to the happiness of nations, especially of the most advanced nations, in addition to the effects of income and the level of economic development.

Source: Based on average level of education by Barro and Lee, 2001.

Home Internet connectivity is closely associated with the level of human capital (.73 ) and with the percentage of the workforce that are members of the creative class (.71).

Source: International Labour Organization 2000-2006 (an average).

Home Internet access is also closely associated with the level of innovation measured as patents (.86), research and development efforts (.89), and entrepreneurship (.69).

Source: USPTO, 2000-2006.

Home Internet connectivity is also closely correlated with happiness (.67) and slightly less so with more open and tolerant attitudes toward gays and lesbians (.48) and racial and ethnic minorities (.3).

Source: Gallup World Poll, 2008.

This is just a preliminary first-cut analysis. I point out that correlation does not imply causation and other intervening factors likely come into play. We hope to look at all of this in further analysis with more advanced statistical techniques. But, for now, we can say that while income and the level of economic development play an important role in home Internet connectivity, it is also related to the type and nature of economic development and the values it engenders. There is something in the nature of post-industrial economies that appears to work in addition to the effects of income. Perhaps it is that people with higher levels of education encourage people to be more connected. Or perhaps people in knowledge-based jobs feel they have to be more connected or their jobs require them to be connected at home as well as at work. Whatever it is, it is clear that not just the level of economic development, but the nature and type of development and the attitudes it brings into play matter to many facets of life today, from overall happiness and well-being to being connected online at home.