Working Paper
Developing Countries in the New Economy

Past breakthroughs in communication technology—the invention of the printing press and the telegraph—led to major economic upheavals. What are the implications of the more recent information and communication technologies (ICTs) for the developing world? Optimists believe that modern ICTs will allow developing countries to catch up with the developed world, while pessimists claim that the growing digital divide will reinforce economic divergence. One significant lesson from history is that mere access to new technology is not sufficient for economic transformation. The presence of so-called network effects makes the outcome sensitive to patterns of demand and usage of new technologies. This may make a case for demand-side initiatives, include government sponsorship of, and direct participation in, new technologies. The paper uses examples to highlight the key issues and specify some policy conclusions.