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Friday, 17 August 2007

Dialling out poverty....

A new fascinating paper by Robert Jensen provides evidence for why the provision of information technology - mobile service in this case - ought to be a priority, especially for nations at the lower end of the income scale:

We find that the addition of mobile phones reduced price dispersion and waste and increased fishermen’s profits and consumer welfare. These results demonstrate the importance of information for the functioning of markets and the value of well functioning markets; information makes markets work, and markets improve welfare. And it is again worth emphasizing that the results represent persistent rather then one-time gains since market functioning should be permanently enhanced by the availability of mobile phones. As mentioned earlier, information technologies are often considered a low priority for developing countries relative to needs in areas such as health and education. However, not only can such technologies increase earnings, but those increased earnings (or increased purchasing power, due to reduced consumer prices), in turn, can be expected to lead to improvements in health and education. In addition, because mobile phones in Kerala are a private sector initiative rather than a development project, other than through perhaps raising interest rates for capital, they do not crowd out investments in other projects. Also unlike most development projects, the service is self-sustaining; mobile phone companies provide service because it is profitable to do so, and fishermen are willing to pay for mobile phones because of the increased profits they receive.

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