Accounting for telecommunications contribution to economic growth: A study of Small Pacific Island States

• Telecommunications and growth nexus in the Small Pacific Island States is explored.
• Augmented Solow framework, ARDL and causality procedures are used.
• Telecommunications elasticity is 0.33% in the short-run and 0.43% in the long-run.
• Bidirectional causation between capital stock and output is noted.
• Telecommunications cause output and capital productivity, respectively.

Noting the developments in the telecommunications sector in Small Pacific Island States (SPIS), this paper explores the effect of telecommunications on per worker output over the periods 1979–2012. We use the ARDL bounds procedure within an augmented Solow framework to explore the effects. Additionally, we examine the causality effect using the Toda and Yamamoto procedure. The results show that telecommunications contribute 0.33% in the short-run and 0.43% in the long-run to output per worker; a bidirectional causality between capital per worker and output per worker, and unidirectional causality from telecommunications to output per worker, and capital per worker, respectively, are noted. Subsequently, we emphasize the need for greater innovation and competition in the telecommunications sector, and linking cutting-edge communication technologies to key sectors to boost efficiency and productivity in the long-run.