The Telecommunications Industry and Its Impact on the Albanian Economy

Abstract

This paper aims to show the importance of the telecommunications industry in the economic growth of Albania. The earliest studies developed in different countries show us that the connection between these factors exists. According to the early studies of Norton (1992), telecommunication helps to reduce the transaction costs, promoting efficiency in different sectors of the economy. According to Leff (1984), telecommunication also influences the economy through the positive effects of network externalities, reduction in information costs, and facilitating the effective and timely coordination among agents. This positive relationship between these factors, on one hand, affects the increase in demand for new services in the telecommunications on the other hand, encouraging the growth of investments in this industry. The latest studies show that a 1% increase in Fixed Broadband Penetration brings a 0.08% increase in GDP and an increase of 1% in mobile Broadband Penetration, brings an increase of 0.15% in GDP. Said that, the purpose of this study is to statistically identify the relationship between these two factors in Albania, highlighting some conclusions on the telecommunications industry and development prospects, which may be the subject of future publications. In the present study, a regression analysis reveals that the relationship between telecommunications and economic growth is highly significant for regions in Albania. Telecommunications development measured in number of broadband lines per hundred inhabitants are found to significantly affect GDP. Many countries in the world are recognizing the role of telecommunications in economic growth, but with all the initiatives to modernize the telecommunications infrastructure, less developed countries like Albania are behind in their efforts because investments are needed for other infrastructures such as: education, energy, roads and bridges, and other physical infrastructures which are also vital for economic growth. How does the situation in Albania stand in relation to developed and less developed countries?