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Investment of Telecommunication Operators and Economic Growth - A Fennoscandinavian perspective

Investment of Telecommunication Operators and Economic Growth - A Fennoscandinavian perspective. Tom Björkroth Turku School of Economics and Business Adminstration, Finland. Previous Studies. Björkroth (2003) Finland: MP=5.22. Cieslick and Kaniewska (2002) Poland: Elasticity = 0.17-1.47.

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Investment of Telecommunication Operators and Economic Growth - A Fennoscandinavian perspective

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  1. Investment of Telecommunication Operators and Economic Growth- A Fennoscandinavian perspective Tom Björkroth Turku School of Economics and Business Adminstration, Finland

  2. Previous Studies • Björkroth (2003) Finland: MP=5.22. • Cieslick and Kaniewska (2002) Poland: Elasticity = 0.17-1.47. • Röller and Waverman (2001) 21 OECD countries: Elasticity = 0.154. • Canning (1999): Elasticity=0.14 - 0.257. • Madden & Savage (1998): MP=12.96-15.06

  3. Gains from investments in tele- communications infrastructure

  4. 2. The Model (I) • Follow Ram (1986) and model the total output (Y) of a two-sector economy with production functions: • Private sector output = Yp(Kp, Lp,Yg,HKp) • Note: Kp = Kp-T+ KT • Public sector output = Yg(Kg, KT , Lg, HKg)

  5. The Model (II) • Growth in output (dY ) is given by:

  6. The Model (III) • Let differential d = and manipulate to get equation (4):

  7. 3. Data and the method • Time series of variables from Finland Sweden and Norway; Years 1971-2001. • Pooled time-series

  8. Why pooled time-series? “To estimate the spillover effects of such investments, one would ideally estimate a production function whose arguments are labor, private non-telecommunications capital, telecommunications infrastructure capital and other public infrastructure. Given different levels of telecommunications investment across states, a pooled time- series cross sectional analysis based on state data would be ideal” (Crandall, 1997, p.171)

  9. Index of real GDP 1970-1999

  10. TELt / Yt-1

  11. Variable dy/y 1.000 I/Y 0.181 1.000 TEL/Y 0.187 0.323 1.000 dL/L 0.600 -0.08 0.095 1.000 PUB/Y 0.297 0.677 0.226 -0.07 1.000 Extg 0.227 0.573 0.245 -0.07 0.554 1.000 dTLF/TLF 0.303 0.356 0.356 0.406 0.088 0.126 1.000 dy/y I/Y TEL/Y DL/L PUB/Y Extg TLF Correlation matrix

  12. (Cor)Relation between labour input and TLF

  13. 4. Conclusions • Our results indicate MP of operators’ investment in infrastructure capital is not significantly different from zero. • This does not mean that investments in telecommunications as a whole are characterised by low productivity • Private investment includes spending on telecom equipment etc… and this effect is not studied here.

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