How internet access promotes development

Across a range of large and developed economies, the Internet exerts a strong influence on economic growth rates.
We can see that development within technology has vastly reduced cost and increased speed of all the digital technologies that drive the internet—in some cases by more than 30 percent per year. 

Reading the WORLD DEVELOPMENT REPORT you can clearly see the decrease in transaction cost and the increase in development due to the internet technology. And as the years has gone by the acceleration of the need for connectivity has increased.

This report is focusing on 3 main points, Inclusion, Efficiency and Innovation. Focusing on these points we can assist to promote inclusion as well as market expansion. 

INCLUSION

Women with small children or persons with disabilities have sometimes been unable to engage in work outside the home, but can now engage in telework. Many poor or disadvantaged populations will now receive public services because governments can use digital IDs to verify their eligibility. And skilled workers and small firms in poor countries can trade their services in global markets, where they can earn higher returns. These are all examples where the internet, by overcoming information problems, contributes to greater inclusion. 

EFFICIENCY

Also existing transactions are lowered with the inclusion of the internet. This raises the efficiency of a vast range of activities. Purchasing goods, executing bank transactions, searching for a home or a job, paying taxes, or renewing a driver’s license generally used to require a trip to a shop or office, but can now be done with a click or a tap. Similarly, the internet has reduced costs for businesses when connecting and negotiating with buyers or suppliers, finding workers through job-matching services, and monitoring contract fulfillment or employee performance. Many of the same benefits extend to governments, as well. These individually unspectacular efficiency gains may, in the aggregate, represent the lion’s share of benefits from the internet. 

INNOVATION

For many internet-based businesses or services, fixed up-front costs can be high, but once the online platform is in place, each additional customer, user, or transaction incurs very little extra cost. This is why we at theunconnected.org are in many of our projects running focused on enabling the access for communities. As in many cases, the marginal transaction cost is essentially zero because what previously involved routine human labor can now be fully automated. 

For purely digital products, such as e-books, the marginal production cost is also close to zero. This cost structure gives rise to various types of scale economies, often reinforced by network effects, where the more users a system has, the more useful it becomes.c Most of the so-called “new economy” firms are in this space.

Finally, in many, if not most, transactions, more than one of the three main points above may be at work. For example, transactions on internet platforms typically involve all three. While the platform running a fully automated service is the main innovation, one side of the transaction often involves a provider of a service, such as an informal driver working through a ride sharing platform or a freelance worker in a remote location. For them, it will often be a case of inclusion in an otherwise inaccessible market transaction. The customer at the other end of the transaction experiences increased efficiency.