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Measuring internet poverty

Measuring internet poverty | Speevr

For the majority of the world, it is impossible to think of life without the internet. Think about life and work during COVID-19 when internet connectivity and digitalization were among the most necessary aspects of daily life. The internet allows us to stay entertained, informed, and, most importantly, connected. The internet is now a basic necessity like food, clothes, shelter, or electricity.

However, not everyone is connected. Many people either pay too much or don’t receive the bandwidth to use the internet effectively. People who can’t afford a minimum package of connectivity are the poor of the 21st century.
This is why World Data Lab (WDL) has developed a global measurement framework of internet poverty to measure the number of people left behind in the internet revolution. People who can’t afford a basic package of connectivity—set at 1.5 gigabytes (GB) per month at a minimum download speed of 3 megabits per second (Mbps) (equivalent to 6 seconds to load a standard web page)—are internet-poor. This is an analog to the extreme poverty line, currently at $1.90 (2011 PPP), which represents a basket of minimum basic needs (mostly of food, clothes, and shelter).
Globally, internet access is rising. Every second, five to six people join the group of internet users (broadly seven are added and one person dies). Today, an estimated 4.5 billion people are connected compared to only half a billion people 20 years ago. As the price of internet access declined sharply, more people started to use it—similar to the rise of mobile phones 20 years ago.

To reduce internet poverty, incomes need to rise, or internet prices must decline. The price of the internet also declines if the quality and quantity improve. Remember when the last iPhone was presented, the previous version became cheaper even though it was performing just as well.
Internet prices for every country are now available from Cable and the International Telecommunication Union (ITU). The cost of the average mobile internet package is $0.50 per day. However, quality varies across countries. Using our model of how prices vary with quality, we obtained the price of a standardized quality of internet use in each country. Setting a standard of 1.5 GB per month with 3 Mbps would allow an individual to browse web pages, check emails, and conduct some basic online shopping for 40 minutes a day. It is our equivalent of the “basic needs” of accessing the internet—enough to do the minimum, but not enough to watch videos or conduct other tasks such as accessing databases that demand higher bandwidth. How many people can afford such a basic internet package?
We assume affordability if it would represent 10 percent or less of a person’s spending. This is in line with recent World Bank estimates for West Africa where only around 20-25 percent of the population can afford mobile internet.
Figure 1. Internet poverty framework

Source: World Data Lab
Based on this definition, World Data Lab estimates that there are around 1.1 billion people living in internet poverty today. This is a lower-bound estimate as it assumes that everyone in a country actually has access to the internet if they are willing to pay, in the same way that poverty headcounts assume that everyone has access to food if they have the money to pay for it.
Focusing on internet affordability, we find that almost anyone living in a rich country can afford to use the internet—even if the price might be rather high. By contrast, the price plays a crucial role in poor countries. At least in the short term, people in developing regions depend on an affordable pricing scheme for them to be able to access the internet.
In particular, our results show that poor countries with cheap internet (below $15 per month), are able to connect a much larger proportion of the population than poor countries with expensive internet. Only 13 percent of the population in poor countries with cheap internet live in internet poverty. Conversely, poor countries with expensive internet have 67 percent of their population in internet poverty. Of the 4 billion people who live in countries with average per capita spending of below $11 per day, 3.4 billion have access to cheap internet by our definition. Only 7.5 percent, around 588 million people, live in poor countries with expensive internet. This group of people must be the focus for eliminating internet poverty.
While there are large differences in incomes around the world, there are also substantial differences in the price for a minimum package of internet. These price differences are independent of per capita incomes. In the U.S., people pay almost double for the same internet package as in the Philippines. Malawi has about the same per capita income as Mozambique but pays on average three times as much for a basic internet package. Among emerging economies, India stands out as a poor country with low internet prices—thus an internet poverty rate of around 8 percent. By contrast, Malawi, Venezuela, and Madagascar have the highest prices in the world even though they are among the poorest countries in the world, suggesting issues with economic growth and internet supply (see Figure 2).
Figure 2. Internet affordability in 2021

Source: World Data Lab estimates
As we have seen over the last year, internet connectivity should be a staple in everyone’s life. While the COVID-19 shock will make it difficult to end extreme poverty by 2030, it is still possible to end internet poverty. If every country encouraged competition and innovation so that prices would decline to the levels of India, then internet poverty would already today decline by more than half.

The changing map of economics

The changing map of economics | Speevr

The International Economic Association’s triennial World Congress has long been one of the most important global gatherings of economists, owing to its success in bringing together researchers and policymakers from the poorest to the wealthiest corners of the world. The 19th edition of the event earlier this month, albeit held via Zoom instead of in person, was no exception.

One recurring theme of this year’s Congress was that the global economy and capitalism are at a crossroads. While the COVID-19 crisis was the immediate impetus for this view, other major shifts—from climate change and the rise of digital technology to the changing nature of labor markets—have been increasingly salient. The pandemic has merely accelerated these shifts or thrown them into sharper relief.
COVID-19 has forced us into one kind of “learning by doing,” an idea that the Nobel laureate economist Kenneth J. Arrow, who emphasized that much learning “is the product of experience,” developed in the abstract a long time ago. We have learned to give lectures and hold conferences by Zoom, and to make complex decisions in meetings conducted via Webex. People have suddenly realized that they had been spending more time than necessary in the office, and that they can do much of their work from home. And we have learned to shop at home, too, via digital platforms.
Economists and society as a whole must confront profound intellectual and moral challenges in order to come to grips with the changing world.
As a result, demand for office and retail space will fall, even after the pandemic. And because more people will have the freedom to work remotely, property prices will gradually rise where they were previously low and fall where they were high, leading to greater leveling.
On the other hand, salary disparities will increase, because the labor market will tend to be more of a common pool with heightened competition for talent. Most important, globalization, after some initial stumbles, will accelerate, with rapid growth in cross-country outsourcing. This is likely to have a significant effect on labor markets, national politics, and the nature of conflict.

Understanding this new world will require major breakthroughs in economic thinking. Economics normally proceeds by contesting the explicit assumptions and axioms on which theory is built. But all scientific disciplines also have hidden assumptions that are so deeply embedded that we do not state them explicitly and often forget they exist. In their celebrated research in the 1950s that provided a formal structure for understanding Adam Smith’s idea of the “invisible hand,” for example, Arrow and fellow Nobel laureate Gérard Debreu showed the many assumptions that were needed for Smith’s conjecture to be valid.
There were other assumptions that were taken for granted—simply part of the woodwork of economics—including the symmetry of knowledge among buyers and sellers. One of the biggest breakthroughs of modern economics was the insight that knowledge is often asymmetric, and that this asymmetry can shatter the invisible hand. This breakthrough earned Joseph E. Stiglitz, George Akerlof, and Michael Spence the 2001 Nobel prize in economics, and led to new forms of regulation that made the modern economy possible. We owe many of our regulations concerning quality control and product standards to this breakthrough, which showed definitively that the market’s invisible hand cannot ensure standards when information is asymmetric.
It remains to be seen what form the economics profession’s new intellectual discoveries will take and what regulations we will need to apply them. What is clear is that the strain humanity has imposed on the environment means growth as we currently know it cannot be sustained. But that does not mean we have to learn to live with lower growth. In fact, I believe future growth will be faster than we have seen thus far.

The lower-growth camp’s mistake stems from a common misunderstanding of GDP or national income. A higher GDP is often taken to indicate more wasteful consumption and consumerism of the kind we are indulging in now. But that need not—and now must not—be the case.
The consumption of more art, music, and learning, as well as better health and greater longevity, are all components of GDP, and are, or can be, environmentally friendly. Reforming our regulatory system can foster rapid GDP growth—but with the content of GDP changing dramatically, and with a disproportionate amount of human labor directed to creative activities. The nature of reform for the new world is a big topic, but policymakers will need to focus on curricula that nurture creativity, because routine work will increasingly be automated; shift consumption away from environmentally wasteful goods; and redistribute wealth radically to lessen inequalities.
My recent research on group morality, however, highlights a caveat that we must address. When discussing matters like climate change and current global inequities, we urge people to be other-regarding. In other words, they should not be concerned solely about their own well-being but also consider the welfare of the current poor and future generations who will be affected by our decisions.
But as moral philosophers have long known, group morality is a problematic concept. I have recently tried to address the “Samaritan’s Curse,” whereby a future generation can end up being hurt when all individuals today take its well-being into consideration. This problem, like the prisoner’s dilemma but in the moral domain, can potentially defeat our best intentions.
So, the road ahead will not be easy. Economists and society as a whole must confront profound intellectual and moral challenges in order to come to grips with the changing world. But humans have done it before. One can only hope that our intelligence and resolve enable us to do it again.

Reconciling economic growth and youth employment creation in Senegal

Reconciling economic growth and youth employment creation in Senegal | Speevr

In recent years, high youth unemployment has become one of the most pressing challenges facing African policymakers. Unlike in industrialized and emerging economies, export-led manufacturing is playing a much smaller role in the structural transformation of Africa’s economies. Senegal is no exception to this trend. While agriculture has lost more than 10 percentage points of its labor share between 2004 and 2019, manufacturing has increased its share by only 1 percentage point, against 7.6 percentage points for trade.

Yet, recent macroeconomic trends do not reveal a stagnant economy lacking opportunity, but one that is growing rapidly and increasingly providing opportunities for its young people. After averaging 3 percent growth per year from 2009-2013, Senegal’s economy grew by 6.6 percent per year from 2014 to 2019. Moreover, youth unemployment dropped from 14 percent to 6 percent between 2007 and 2016. Again, unlike the experience in much of Asia, manufacturing does not appear to be driving these trends.
Instead, a growing body of literature identifies some sectors that are similar to manufacturing in many regards, and that could be nurtured to support economic growth and generate employment. These industries, termed “industries without smokestacks” or IWOSS, are characterized by (i) being tradeable, (ii) generating high value-added per worker, (iii) having a greater potential for technological change and productivity growth, and (iv) showing evidence of scale and/or agglomeration economies. Our recent report analyzes the potential of IWOSS sectors to, if properly leveraged, dramatically boost good-quality job creation in Senegal.
Overall, at 4.5 percent per annum, IWOSS sectors in Senegal experienced a substantially higher growth rate between 2001 and 2017 than did non-IWOSS sectors (2.7 percent) and manufacturing (3.4 percent) over the same period. On the labor market side, the employment elasticity for IWOSS sectors tourism and agro-processing are 0.96 and 0.88, which are higher than manufacturing (0.54). Horticulture’s is even higher, at 0.97. A higher employment elasticity means that as these IWOSS sectors grow, they will tend to create more jobs than manufacturing.

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IWOSS in Senegal has shown higher employment growth for women
Importantly, employment elasticities are, in general, much higher for women than for men, for both IWOSS sectors and non-IWOSS sectors alike (Table 1). Indeed, while male employment in IWOSS grew by 3.9 percent per over the 2001-2017 period, women experienced an even higher employment growth rate in IWOSS (5.1 percent) over the same time frame.
Table 1. Employment-output elasticity for Senegal

Total
Male
Female

Overall economy
0.55
0.43
0.76

Total IWOSS
0.77
0.65
0.97

   Agro-processing
0.88
0.73
1.15

   Horticulture
0.97
0.9
1.16

   Tourism
0.96
0.81
1.14

   ICT
0.19
0.13
0.29

   Transport
0.24
0.14
0.41

   Financial and business services
0.99
0.9
1.13

   Trade: formal
1.17
1.04
1.41

   Other IWOSS services
0.46
0.35
0.65

Manufacturing
0.54
0.42
0.78

Other non-IWOSS
0.48
0.35
0.70

   Agriculture
0.3
0.16
0.5

   Mining
0.10
0.06
0.13

   Utilities
0.19
0.14
0.31

   Construction
0.56
0.44
0.68

   Trade: informal
1.14
1.0
1.37

   Government
0.4
0.29
0.6

   Other non-IWOSS services
0.52
0.43
0.70

Source: ANSD (2019), Direction de l’horticulture, ilostat (2020), authors’ calculations.
Despite the promise shown by IWOSS for women, the employment growth rate for youth (aged 15-24) remains much more limited than for older people. Both for IWOSS and for non-IWOSS, the youth employment growth rate is lower (2.3 percent for IWOSS and 0.0 percent for non-IWOSS) than that of adults (25+ age bracket), whose employment growth rates are 6.2 percent for IWOSS and 4.6 for non-IWOSS.
Despite this promise, constraints are holding IWOSS sectors back
While certain IWOSS in Senegal certainly have the potential for job creation, a number of obstacles stand in the way of the growth of those sectors. Removing these hurdles to IWOSS growth might considerably change the growth trajectory of Senegal in the near future, by, in our estimates, doubling annual growth rates from their baseline level.
Horticulture

Having access to credit in Senegal is a lengthy process and has several limitations relative to obtaining credit from commercial banks. Interest rates are high, and barriers to access to credit are not homogenous across sexes. More specifically, women have a harder time accessing loans as all the parameters relative to having worthy collateral are, most of the time, linked to the borrower’s employment status. Moreover, the horticulture sector lacks qualified and skilled laborers that would enable its operators to be competitive in the international markets by producing high-quality products in the timeframe imposed by international buyers. Finally, the impact of climate change on livelihoods cannot be ignored: The natural resources required to have good yields are getting scarcer and the technological investments necessary to allow producers to adapt to those climatic changes are not made. As a result, products are not properly conserved nor transformed thus leading to huge yield losses. To counter these issues, it would be important to make infrastructural investments to minimize yield losses and increase opportunities for conservation and transformation, provide capacity-building opportunities, and develop and popularize climate change adaptation measures.
Tourism
The biggest issues in the tourism sector are related to climate change, as Senegal has capitalized on “watercourse tourism” where most tourist activities are centered around water. Therefore, rising sea levels threaten most of those activities. Additionally, most investments around tourism are concentrated in big cities like Dakar. The remote rural areas, which also hold breathtaking tourist attractions, lack adequate infrastructure that would attract private investment. Thus, policymakers should make important infrastructural investments in rural areas as a means to attract private investments, and identify and implement climate change mitigation measures that would enable a sustainable exploitation of resources.
Agro-industry
Policymakers must take steps to reduce the barriers to entry to IWOSS sectors, especially lack of adequate infrastructure. Eight percent of the companies interviewed in the World Bank’s 2014 Senegal Enterprise Survey name electricity as the main constraint to conducting their business activities, and 48.2 percent characterize it as a significant constraint. Furthermore, in an effort to increase profit margins, it is crucial to have access to foreign markets with accessible import and export procedures. In Senegal, exporting a regular container of products requires up to six documents and up to $1,225 in fees. Importing the same container requires five documents and a $1,740 fee. Reforms for entry and export of goods are essential for this sector’s further growth.

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