Investment triggers inclusiveness in the Bolivian TELECOM Sector?

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By:

Javier Aliaga Lordemann

Sergio Mansilla

La Paz, july 2021

Abstract

Public and private infrastructure has an important role in economic growth, human development, and quality of life; hence the investment on infrastructure provision (access) probably will have a direct and positive effect on productivity and innovation, at the same time a better distribution of this infrastructure access (equity) will have a positive but indirect effect on welfare. Under these assumptions, the objective of this paper is to assess the impact of Telecommunications (TELECOM) investment over – first – the growth and evolution in the access and equity to various services – i.e., fixed, mobile, and broadband during the last 15 years in Bolivia; and – second – to evaluate the investment causality over the sectoral GDP. First, we derived a long-term parsimonious equation specified as an Error Correction Model (ECM) estimated from an Autoregressive Model with distributed lags (ARDL). Second, we estimated several sets of Social Opportunity Functions (FOS) for the TELECOM to evaluate the degree of inclusiveness in the sense of Ali and Son (2007). Our main findings show that Public investment indicates a crowding-out effect in the short and long term over the sectoral GDP; and the long-term relationship between these variables has convergence toward its long-term equilibrium for the period 1990-2020. Also, the access to household’s internet in the urban areas has been moderate during the last 15 years, but there is still a lack of distribution to this opportunity. Regarding to rural household’s, we verify that it continues to be very low and has an inequitable distribution of access; however, we expect this result due to this service (household internet) is competing with mobile devices. Summarizing, we verify the hypothesis of Chatterjee and Turnovsky (2012) “…  higher spending on infrastructure increases the growth rate, but it favors the rich and increases inequality” … in the absence of mechanisms to improve equity in access.

Keywords: Infrastructure, growth, inclusiveness, access, equity, telecommunications.

JEL Classification: H54, D63, L96, O41.

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