What Drives Investment in Telecommunications Markets? Evidence from OECD Countries

Abstract

Recent studies provide clear evidence that the quality of telecommunications infrastructure has strong impacts on economic growth. Especially in Germany there is a controversial debate how to stimulate telecommunications investment to foster the introduction of Next Generation Networks. To find appropriate policies to enhance infrastructure investment one has to get a thorough understanding of the determinants of infrastructure investment. Using a panel consisting of 30 OECD countries for the period 1990 to 2011 and taking account of possible non-stationarities in aggregate data, we investigate the main drivers of telecommunications investment on an aggregate level applying dynamic panel data methods. Our main finding is an inverted U-shaped relationship between per capita telecommunications investment and competition.