Is digitalization a booster for economic growth in Africa? Short run and long run evidence from Tanzania

Abstract

The least developed countries (LDCs) must experience faster economic growth rates if they are to catch up to the industrialized nations. A key factor in advancing economic growth and development in the digital age are information and communication technologies (ICT). We use time series data from 1994 to 2021 and use an autoregressive distributed lag (ARDL) technique to estimate the effects of ICT on GDP growth for Tanzania, the world's most populous country located entirely south of the equator. We establish a causal relationship between ICT infrastructure/access and GDP growth in Tanzania, accounting for both short-run and long-run dynamics. In particular, mobile telephone subscription growth exhibits a significant impact on economic growth in both the short and the long run in Tanzania. This suggests that, at early stages of digitalization, adoption of mobile telecommunications gives a boost to economic growth, as early adapters tend to be very effective users. However, diminishing marginal returns appear to result, as other production factors may not fully absorb technological advancements.