The Role of ICT in Economic Development – A Partial Survey

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The Role of ICT in Economic Development – A Partial SurveyBog'liq zef dp07The Role of ICT in Economic Development – A Partial Survey
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in the economy, and the appropriate antidote in many cases is to engage in informational
activities (see Hirshleifer and Riley, 1992). In this context, the key role of ICTs is that they (are
tools that) may be used to acquire and process information and reduce uncertainty. The following
section examines the manner in which these technologies may improve the performance of
organizations.
3.1 Functioning of organizations
Consider that information costs consist of two components: the cost of gathering and
processing information and the cost of distributing information. In developing countries,
inadequate communication facilities and high transmission costs reduce the use of existing
information and inhibit the production of new information. In such environments, the
introduction of reliable and speedy ICTs may have several effects. First, a reduction in the cost
of transmitting information will lead to a right-ward shift in the information supply curve, i.e., a
reduction in the price and an increase in the transmission of information. Second, since
information technology reduces the cost of processing and producing information, there is
additional impetus for growth in the supply of information and further reductions in prices. In
addition to increasing the quantity of information, the use of ICTs will probably enhance the
quality of the available information. Instead of relying on obsolete information, individuals and
firms may have access to up-to-date, reliable and more complete information. In a nutshell, the
spread of ICTs may facilitate an increase in the availability and quality of information that may
be useful for economic and organizational decisions.
The amount of information used by economic agents should satisfy the standard marginal
conditions and accordingly, a reduction in the cost of acquiring information should lead to an
increase in the amount of information used before economic and administrative decisions are
made. The reduction in uncertainty resulting from the use of this additional information should
lead to more informed and improved managerial and administrative decision-making.
A key feature of ICTs is that they permit interactive communication and negotiation.
This capability to transfer information and communicate around the globe, unhindered by
distance, the volume or the nature (video, sound, data) of the information to be transmitted, may
lead not only to better, but also to faster decision-making.
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Thus, market uncertainty concerns the endogenous variables of the economic system (prices and quantities), and
event uncertainty the exogenous data.
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In addition to increasing the efficiency of firms, the spread of ICTs may help create new information-intensive
firms and industries in developing countries. For instance, high-speed international communication links have
enabled India to become a major producer of software. Similarly, exportable-service jobs such as data entry, airline-
reservation services and tele-centers for buying various products may be set up in developing countries to provide
24-hour services. While we note these possibilities we do not delve too deeply into this area for the sake of brevity.
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