Cities, Regions and Internet Infrastructure in Europe
New Horizons in Regional Science series
Chapter 7: Internet infrastructure and regional economic development: a causality analysis
This chapter explores the relationship between the Internet infrastructure and regional economic development at an aggregated pan-European level. Apart from identifying the significance of such a relationship, the main challenge here is to understand the direction of causality: do investments in digital infrastructure stimulate regional economies, or is economic development a pull factor for the Internet infrastructure? As discussed in Chapter 2, technology has always been a component of growth models, but the assumptions behind this have varied over time. Solow’s neo-classic model (1956) treats technology as an exogenous factor, independent of capital and labor (Pike et al. 2006; Aghion and Howitt 1998). Romer’s (1986, 1990) endogenous growth theory emphasizes even more the impact of technology and technological change on growth process. New economic geography (Krugman 1991a, 1991b) identifies spatial structure as the result of simultaneous action of centripetal and centrifugal forces (Krugman 1998). Therefore, the information and communication technology (ICT)-related transport and communications cost reduction could lead to a disturbance of the current equilibrium between centrifugal and centripetal forces (Maignan et al. 2003).
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