Mobile telephony and economic growth in Cameroon

Table of Contents

ABSTRACT

INTRODUCTION

LITTERATURE

DATA & APPROACH

RESULT AND POLICY IMPLICATION

CONCLUSION

ANNEXE

REFERENCE

ABSTRACT

We examine the impact of mobile telephone in Cameroon. Indeed, telecommunication attracts more and more investors since the boom in 2000 of mobile cellular in developing countries of the Sub-Saharan regions. Using Generalized Method of Moments on times series 2006-2016 to get the participation of mobile telephony on Cameroonian economic growth, we found that mobile telephony penetration has positive incidence on Cameroonian GDP.

Keywords: Cameroon, GMM, mobile telephony, Growth Economy

INTRODUCTION

Telecommunication is an important factor in the economic development. It is even seems as more important factor than education in less developed countries according to Alleman James and Park Yunjo-Joe (Alleman & Park, 1995). Around 1994 only one African country had more than 5 main line per 100 inhabitant with approximately 40 percent in South Africa (NOAM, 1999). But in 2000, a tremendous increase in the telecommunication sector has been observed and keep increasing. In 2017, mobile subscriber increased by 44% in 2017 in the sub-Saharan Africa region and studies are forecasting an augmentation in mobile subscriber penetration of 48% by 2020 and by 52% by 2025 (GSMA, 2018). When we compare these statistics with the one of developed countries (Figure2), the difference may seems huge but when comparing it with the fixed-line which arrived in Africa during colonization period, we observe that mobile phone adoption in less developed countries were quicker than fixed line because of the high cost of installation which has a direct effect on the cost of having a fixed-line with the final consumer.

It is known that mobile telephony participates into socioeconomic, educational and political sectors. Indeed, mobiles phone overcome boundaries between rich and poor, rural and urban (Aker & Mbi, 2010), national and international. It gives a freedom of telecommunication: it is easy and cost saving to communicate with someone living in Douala and Yaoundé or discuss at international level.

Cost saving increases the company efficiency and they are most likely to perform well, like the Spaza Shop owners who reduced their travel cost to contact suppliers or place order (Frempong, 2009). Mobile telephony is also used get medical update via an alert or to receive money in few minutes. To order or sale products, to send or receive money. To share knowledge and information, for instance, farmers in Senegal who check best price online before negotiating with wholesalers and getting a better deal (TRAORE, 2012).

Figure 1 : Job distribution in telecommunication sector in Cameroon

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Source: Cameroon Telecommunications Regulatory Board.

Our empirical research will focus on Cameroon, which is the giant of the Central African countries region. Telecommunication sector is in expansion in Cameroon. This sector observes an increase in investment of 34.04% compare to 2015 (Board, 2017). The Cameroon Telecommunications Regulatory Board on its report of 2016 shows that mobile phones operator revenues contributed to the GDP with 3.25% (Board, 2017).

In 2014, 81% of household had mobile phone with 95 per cent in the rural area and 66 in the rural area (IUT, 2017). Add to the fact that mobile telephone are making life easier with communication cost saving, rapid connection. Cameroon is also facing direct job creation from mobile phone operator(figure1) and indirect one like Call boxing and e-money banking (Image1).Mobile telephony enhance knowledges flow, effective supply chain management.

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Image1: e-money start-up^[1]

However, it is hard to have real participation of mobile telephony in the Real Domestic Product of the country (Virta, Punmalainen, & Tuppura, 2012). This brings us on problem raised by our empirical research: what is the impact of mobile telephony on the economic development of Cameroon?

Figure 2: Mobile subscriber penetration rate

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Source: GSMA Intelligence data December 2017

This paper aims to contribute to the literature of mobile telephony in Africa, precisely in Cameroon. Our empirical study will first present Cameroon and his economy: Then we will examine some literature to compare the influence that mobile phone has all around the world. The next step will be an econometric study using generalized Method Moment approach (GMM) inspired by Lars Peter Hansen (Hansen, 2001).

LITTERATURE

Some researchers have been made in this topic, but not much using econometrics methods. In a study of 9 nine OEDC countries, found a positive impact of ICT on the economic growth especially on United State of America, Australia, Finland and Canada (Coclecchia & Schreyer, 2002). Other authors focus on broadband infrastruction, using simple regression method for 20 OECD countries; found that in developed countries, population demand for new technology may drive economic development (Nina, Oliver, Tobias, & Ludger, 2009).Another one shows the negative impact that a low mobile penetration has on Canada economy and encourage economic policy with accruing mobile telephony subscription (Melamed, 2007). In China, using GMM analysis, mobile services has contributed to 0.82% to the average of the overall growth 11% (R & Shilin, 2014). Tracy Lum in an empirical study over 182 countries using OLS, fixed effect and 2SLS, found that mobile cellular penetration has positive and significant impact on economic development. From the same results, he underlines the fact that technology is used differently on countries developed and less developed countries. Due to the fact that, results are showing smaller impact of mobile phone penetration on economic development for countries with high rate of cellular subscription than countries with a low rate mobile cellular subscription (Lum, 2011)

In developing countries, The Vodafone Policy paper series OLS regression found that mobile phone use is an important element for the social and economic development of developing countries (Waverman, Meshi, & Fuss, 2005).An empirical study of fixed and mobile broadband impact on economic development in Philippines, between 200-2010 found that, the mobile broadband impact was not that wider, but was still participating into economic development by affecting crucial sector as education, public health, government services, entertainment (ITU, 2012). Another author using IV estimation method found a positive impact of mobile phone use on economic development in Uganda. In India, an empirical research found that mobile telephony enhances productivity in the fishing industry (Abraham, 2007). Result of a paper using binary logit model in Pakistan shows that cellular phone has significant impact at 1% level (Malik, Chaudhry, & Abbas, 2009). A paper using 3 SLS approach, found that the mobile phone and fixed-line over economic growth it is not huge but significant (Sridhar & Sridhar, 2008). Awa Traore using generalized method moment dynamic panel system, found that cellular has significant effect on the GDP per capita in the sub-saharan region (TRAORE, 2012). Another paper using multi-stage sampling shows evidence that mobile telephony participates to direct and indirect job creation (Perekwa, Prinsloo, & Deventer, 2016).By using survey method to study mobiles telephone opportunities for micro and small company in Ghana, Godfred Frempong found a positive impact on those businesses (Frempong, 2009). Examining 52 african countries with Two-stage-least-square method, Asongu found that, mobile telephony has a positive “incidence on informal financial intermediary development” (Asongu, 2012).

DATA & APPROACH

Data has been sourced in World Bank data and cover 2006-2016.

Table 1 : Variables

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Based on Growth domestic product function (1):

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Where:

C: Consumption

Govexp: Government expenditure

investm: Investment

NE: Net export (export-import)

But the Trade balance (NE) of Cameroon is negative for the chosen period and it may influence our result.

Thus, we will replace NE by trade And to have their net impact on Cameroonian GDP, we will use data concerning their net participation on the GDP. For a better caption of individual effect, we will use GDP per Capita with represents the economic growth.

Our hypothesis will be:

H₀: Mobile telephony impacts economic growth in Cameroon.

Adapting equation (1) to equation (2)

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Where f is the priori, X_t is observed times series vector

[illustration not visible in this excerpt] Is an unknown parameter vector

And assuming a set of L moment that the K-dimensional parameters of interest,β₀ should satisfy. With the vector L ≥ K moment conditions give equation (2). The aim in GMM method is to find β₀ and test the moment relation. Based on Lars peter Hansen (2001).

From (1) and (2) we have:

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With the annual growth rate of GDP per capita expressed as a function of the lag of real GDP per capita, mobile penetration, fixed-line penetration and growth determinant: aggregate determinant of household consumption, government spending and investment participation on GDP(4).

Except for mobile penetration and fixed-line penetration which has been transformed in regards to inverse hyperbolic sine transformation, all other variable are expressed in logarithmic form.

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Where [illustration not visible in this excerpt]

ln [illustration not visible in this excerpt]

[illustration not visible in this excerpt]=country specific effect independent across i

And this transformation leads to (5).

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Where [illustration not visible in this excerpt]

We will test the impact that the GDP may have on the mobile phone penetration (6).

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RESULT AND POLICY IMPLICATION

Our test processing starts with data description (Table 5). When observing Figure 3 we can see that the mean of mobile phone penetration 49.97642 is important than fixed-line penetration: 2.857046.

The Table 2, reports results of GMM times series estimation with observation covering 2006 and 2016 period. We can observe that Household consumption aggregate has the most (negative) impact on the GDP with –24.64871 for each 10% increase of household consumption. Houses hold consumption Household consumption is followed by the mobile phone. Thus, for each 10% of mobile telephony penetration, the Cameroonian GDP increases by 1.09473%. And we fail to reject our null hypothesis H₀ at 5% significant level. For a 10% increase in fixed-line penetration, the GDP increase by 0.126139%.In table 3 reports Wald test result of the mobile telephony penetration endogeneity. And the p-value result fails to reject our null hypothesis.

Table 3, reports the GMM times series, with mobile phone penetration as independent variable. We can see that for each 10% increase of growth domestic product, the mobile phone penetration rise with 0.850646%. We fail to reject our null hypothesis at 5% significant level.

Table 2 : GMM test 1

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From these results we can see that mobile phone and fixed-line have positive and significant impacts on Cameroonian economy development. The mobile telephony impact is greater among our chosen variables. More the mobile telephony and GDP have a feedback relationship.

Table 3 : GMM test 2

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There is a growing role of mobile phone in the Cameroonian economy. Thus, the Cameroonian government will win by introducing policies to encourage investors in the telecommunication sector.

CONCLUSION

In this paper; we analyze the participation of mobile telephony on economic growth based of the time series 2006-2016 of Cameroon using GMM test. We found that, mobile cellular penetration has a positive and significant impact on the growth domestic product. which implies the importance of opening the telecommunication sector to investors by the Cameroonian government. Discussing on our limitation, the analysis will have been completed, if we have made test by each economic sector. It would have given us a precise participation of mobile phone on the economic growth.

ANNEXE

Table 4 : Descriptive Data

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Table 5 : Wald Test

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REFERENCE

Abraham, R. ( 2007). Mobiles phones and Economic Development: Evidence from the fishing industry in India. Information Technologies and International Development, 15-16.

Aker, J. C., & Mbi, I. M. (2010). Mobile Phones and Economic Development in Africa. Journal of Economic Perspectives, 207.

Alleman, J., & Park, Y.-J. (1995). Telecommunication and Evidence Growth: Econometric Evidence. Telecommunication Infrastructure Conference (p. 5). Michigan: Interdisciplinary Telecommunications Program.

Board, C. T. (2017). Observation Annuel 2016 du marche des communications electroniques. Yaounde: Cameroon Telecommunication Regulatory Board.

Coclecchia, A., & Schreyer, P. (2002). The contribution of Information and Communication Technologies to Economic Growth in Nine OECD Countries. OECD Economic studies, 166-168.

Data, W. B. (2018, april 9). Databank. Récupéré sur report: http://www.worldbank.org

Frempong, G. (2009). Mobile telephone opportunities: the case of micro-and small enterprises in Ghana. Emerald Group Publishing Limited, 88.

GSMA. (2018). The mobile Economy. London: GSM Association.

Hansen, L. P. (2001, February 20). Generalized Method of Moments Estimation: A Time Series Perspective. International Encyclopedia of the Social and Behavior Sciences, 2-13.

ITU. (2012, May Monday). The Economic Impact of Broadband in Philippines. Broadband Commission for digital Development, pp. 20-23.

IUT. (2017). Measure the Information Society Report. Geneva: International Telecommunication Union.

Lum, T. (2011). Mobile goes global: The effect of cell phones on economic growth and development. Bucknell Digital Commons, 16-35.

Malik, S., Chaudhry, I. S., & Abbas, Q. (2009). Socio-economic Impact of Cellular Phones Growth in Pakistan: An empirical analysis. Pakistan Journal of Social Sciences, 30-31.

Melamed, L. (2007). The Impact of Growing Mobile Telephony Penetration in Canada: Lots More Gross Domestic Product. S. Melamed Associated Inc, 2-9.

Nina, C., Oliver, F., Tobias, K., & Ludger, W. (2009). Broadband infrastructure and economic growth. CESIFO, 11.

NOAM, E. M. (1999). Telecommunications in Africa. New York: OXFORD UNIVERSITY PRESS.

Perekwa, G. B., Prinsloo, T., & Deventer, J. V. (2016, June). The Impact of Mobile Technology in Micro and Small Enterprises in Zimbabwe in the Post-Hyperinflation Economic Era. African journal of Information Systems, 53-61.

R, W. M., & Shilin, Z. (2014). Mobile telecommunication infrastructure and economic growth: Evidence from China. 25th European Regional Conference of the International Telecommunications Society (p. 21). Brussels: International Telecommunications Society.

Sridhar, K. S., & Sridhar, V. (2008). Telecommunications Infrastructure and Economic Growth: Evidence from Developing Countries. Applied Econometrics and International Development, Vol. 7, No. 2, 2007, 41-54.

TRAORE, A. (2012). Mobile Phone in Sub-saharan Africa: Impact on Technological Innovation and Economic Development. Laboratoire d Economie d Orleans, 13-21.

Virta, H., Punmalainen, K., & Tuppura, A. (2012). Mobile Telephony and Economic Growth in Developing Economies. IGI Global, 75.

Waverman, L., Meshi, M., & Fuss, M. (2005, March). Africa: The Impact of Mobile Phones. The Vodafone Policy Paper Series, p. 18.

^[1] http://www.orange.cm