Telecommunications Infrastructure and Usage in Rural Areas: a Production Function Approach

This research uses the production function theoretical framework and an extensive, exchangelevel database on telephone usage and infrastructure, employment and population, to clarify the relationships between rural economic activities and telecommunications. Relationships are estimated through regression analysis, linking telephone usage, measured in aggregate conversation seconds, by each of eleven economic sectors, to such variables as sectoral employment, rurality of the exchange, availability of advanced telecommunication infrastructure, regional core-periphery location of the exchange, and sectoral growth. The results show that telecommunications and labor are, in most cases, complementary inputs in each sectoral production function, that rural activities use telecommunications less in the absence of advanced technology, but that the latter tend to significantly increase telecommunications usage. This result tends to support the idea that an advanced telecommunication infrastructure in rural areas may be important to attract specific activities, particularly professional services, that make heavy use of telecommunications, and thus to promote rural economic development.