Telecommunications Capital Intensity and Aggregate Production Efficiency

This chapter explores the link between telecommunications capital intensity and aggregate production efficiency in the framework of meta-frontier analysis. The latter makes it possible to compare technical efficiency levels between countries operating under different technological frontiers. The author’s analysis suggests that increasing per capita levels of telecommunication capital will push a country towards its local frontier, but it will not decrease much the technological gap with the global meta-frontier. In Africa policies providing incentives for firms and households to purchase more telecommunications equipment appear to be most justified in terms of efficiency gains, while this does not appear to be the case for the OECD countries. The author’s general conjecture is, in order to avoid wasting productive resources on increasing the level of telecommunications capital intensity, it is advisable to keep a close eye on the location of a country’s aggregate output with respect to both local and meta-frontiers.