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Cell phones in developing economies
How do cell phones affect economic growth in countries where communications infrastructure is poor?
A recent paper covered in the Economist suggests that cell phones have reduced waste in fisheries, by giving boats price information before they return to shore. They can choose profitable markets for their catch. The reduction in waste increases the total value of the catch by 5% or more. Better arbitrage and lower information costs result in a sustained productivity gain.
There is lots more to the story here than simple arbitrage opportunities. Communications technology lowers the cost of information for all parties on the network. This should result in lower barriers to entry, lower transaction costs, more innovation, higher productivity, and access to many more customers.
Please add your questions, thoughts, and suggestions.
From Paul: I wonder whether there is a search factor that mediates the ability of cell phone users to leverage the technology in expanding their current network of business associates. Take for example the fisherman, he already knows the fish buyer and can ask for his cell phone number. But how does he discover the phone numbers of other potential business partners? Word-of-mouth? Is that a critical micro issue that constrains the emergence of the macro phenomena discussed above?
(please add yourself to this list)
- Firms and households are agents in the economy
- Market access: how do firms find customers?
- Innovation: simple productivity gains, or development of new economic niches?
Financial transactions via text message
Recently cell phone companies have permitted credits (essentially a form of cash) to be transferred among users via text message. This system of payments is a rudimentary financial service for households, potentially in competition with microfinance and the formal financial sector.
(Ben, this is what I was talking about. For some reason I can't find it on the NPR site. - Vikas) http://technology.guardian.co.uk/news/story/0,,2038302,00.html