ICT, Market Contestability and Economic Performance: Lessons from ERF Countries

Abstract

Using a panel data of 107 countries including developed, developing and ERF (Economic Research Forum for Middle East, Iran and Turkey) countries over the 1995-2004 period, this paper explores the impact of information and communication technology (ICT) growth on overall economic performance through its positive impact on market contestability, with respect to ERF countries and other developing and developed countries. We follow two hypotheses: that improvement and growth of ICT make domestic markets (industries) more contestable, and that the higher degree of market contestability improves the overall performance of the economy, measured by the increase in real GDP. This paper finds that the degree of overall contestability is positively and significantly affected by the increase in ICT services in all three groups of countries. This result supports the hypothesis concerning the importance of information in making markets more contestable. Moreover, there is a positive and significant impact of ICT on per capita GDP. As for the impact of increase in the degree of contestability on economic performance, we found that developed countries experienced a positive and significant relation, but such a relation was insignificant in the other groups — developing countries and ERF sample.