The Causal Effect of the Internet Infrastructure on the Economic Development of the European City Regions

Abstract

This paper examines the direction of causality between the Internet infrastructure (cyber-place), as is reflected in the accumulated international Internet backbone capacity, and economic development of the European city regions. On the basis of previous research which highlights the uneven allocation of this complex network infrastructure, this paper attempts to move the analysis a step forward, and addresses the causality issue by using the Granger causality test for panel data. The latter explores the heterogeneous causal effects of the Internet infrastructure, and results in verifying the well-established argument that ICT infrastructure is a necessary, but not a sufficient, condition for economic development.

Keywords: internet infrastructure, granger causality, regional economic development

JEL Classification: R11, L96, C23