Connected for Development? Theory and evidence about the impact of Internet technologies on poverty alleviation

Abstract

Based on the assumption that increased access to internet services boosts economic growth and improves the well-being of the poor, governments in both developed and emerging regions are heavily investing in internet connectivity projects. This article reviews the existing evidence as to the impact of internet technologies on various development dimensions, and articulates the empirical evidence into an analytical framework that seeks to identify the micro-linkages between internet adoption and poverty alleviation. The review suggests that the development pay-offs of internet technologies are ambiguous due to two interrelated effects. First, because effective appropriation requires a range of skills as well as complementary investment in human capital and organizational changes. This tends to favour well-educated workers and firms with more innovative capacity and access to finance. Second, because the positive effects of internet dissemination on market co-ordination and political institutions grow exponentially with adoption levels. As a result, while the evidence indicates that advanced economies are reaping significant benefits from internet investments, the returns for less advanced economies, and in particular for the fight against poverty in these regions, remain uncertain.