How Mobile Phones Make Economies Grow Faster

Mobile phones—especially 3G ones—make economies grow faster

By Jackie Snow

A bank employee selling accounts on the street uses a mobile phone to check an identity document, outside of Cape Town, South Africa. Getty Images / Per-Anders Pettersson

 

Studies have shown again and again that mobile-phone networks help economies grow. And it’s not just because people need to be employed to build the networks and sell the phones. By increasing the flow of information, mobile phones improve productivity and efficiency, and open up new markets and new kinds of business all across the economy.

Now there is evidence that improving mobile internet access helps economies too. A recent study examined the effect of faster 3G wireless data connections replacing slower 2G ones. The study by the GSM Association mobile trade group, Deloitte and Cisco, looked at 96 developed and developing markets from 2008 to 2011. When a market experienced a 10% shift from 2G to 3G, GDP per capita growth increased by an average of 0.15 percentage points. A separate look into 14 countries between 2005 to 2010 found that a doubling of mobile data use led to an increase of 0.5 percentage points in per capita growth. (It’s always challenging to isolate causal relationships between such factors, and the study’s sponsors have an obvious interest in promoting any evidence of a societal payoff from expensive wireless network upgrades.)

The range is wide. Countries with a higher level of data usage per 3G connection, like Russia, South Korea and the UK, have seen an increase in their GDP per capita growth by at least one percentage point. India, which is at the other end of the scale, showed no growth attributed to 3G adoption, since the country only started to roll out 3G in 2011 after years of bureaucratic stalling.

There are one billion global mobile 3G subscribers, making up 18% of all mobile users, an increase of more than one-third on 2011.

“The fact that increasing high-speed mobile broadband data usage leads to greater average per capita income underscores the need for increased investment in wireless networks as well as for government policies to foster that investment, including the allocation of additional spectrum,” said Dr. Robert Pepper, vice president of global technology policy at Cisco.