Productive use of the Internet to accelerate income per capita growth in Sub-Saharan Africa

Abstract

This paper investigates the potential link between internet use and income per capita growth in Sub-Saharan Africa (SSA). Despite greater internet access throughout the region, many countries still fail to achieve the anticipated economic growth. This research explores whether and how internet usage affects real income per capita growth and identifies the conditions that cause this effect to manifest. A simultaneous equation model (SEM) and the three-stage least squares (3SLS) method analyzed data from 27 Sub-Saharan African countries between 2008 and 2019 to understand the relationship between internet use and income growth. The model incorporated equations for internet demand and supply to examine the impact of price, infrastructure quality, education levels, and governance efficiency. Research revealed that internet usage slightly decreases income per capita growth in a statistically meaningful way. The unexpected outcome likely arises from poor internet access, high costs, insufficient infrastructure, and limited digital skills in several nations. Strong institutions and low inflation rates support income growth. Internet demand faces major restrictions due to high costs, while expanded electricity access supports the growth of the Internet supply. This study concludes that simply increasing internet access alone will not lead to improved income growth. To achieve higher productivity from internet use, SSA countries must develop superior infrastructure and affordable services while building strong institutions and investing in digital skills training. The region stands to benefit as these improvements unlock the internet's full potential as a driving force.