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Determinants of Internet
Usage in Developing
Countries
16 DECEMBER 2016
ABSTRACT
The purpose of the study is to determine the technical, economic, and sociodemographic factors that are related to
the percentage of internet users in developing countries. It focuses on the potential significance of each factor in
preventing or enabling a larger percentage of the countries' citizens to make use of the internet.
A multivariable hypothesized model was evaluated using multiple regression analysis, and was repetitively revised
through continuous removal of variables which were found to be insignificant to the percentage of internet users,
until a model which contained only statistically significant regressors was determined. The analysis showed that a
developing country’s GDP per capita, percentage of urban population, average internet speed, and average internet
price are not significant determinants of internet usage. However, literacy rate showed a strong linear relationship
with the proportion of citizens that use the internet, accounting for approximately 84% of the variation in the
percentage of internet users across developing countries. Thus, it may be beneficial for governments of developing
countries to address their citizens’ literacy rates to potentially increase internet usage among its populace.
BACKGROUND
Over the past few decades, the internet has drastically affected our lives, making it more productive and fast-paced. It
has been dubbed as The Great Equalizer because it has allowed people, from all walks of life, access to multitudes of
the same information. It has made the world, relatively, a levelled playing field by granting each and every person the
opportunity to discover more than what has been granted to them before.
Since the internet became available to the public in 1991, it has been gradually integrated into social, technological
and economic processes such that the internet access is now perceived as a large determinant of a country’s growth
(UNDP, 1999). For citizens of developing countries such as the Philippines, internet access is an avenue for
knowledge and information, increased efficiency (i.e. streamlining business and government transactions) and a
means of keeping up with the rest of the world. Thus, the governments of these developing countries must strive to
ensure that more of their citizens can access the internet.
The purpose of this study is to determine the relationship between selected technical, economic and
sociodemographic variables, and the percentage of internet users in developing countries. Although correlation does
not imply causality, the results of this study might set in motion the reassessment of certain factors that must be
addressed in order to potentially increase the proportion of citizens that make use of the internet, which may lead to
more prosperous outcomes.
According to a study by the McKinsey Global Institute, the internet is contributing strongly to a country’s wealth.
Approximately 21% of GDP growth in developed countries from 2007-2011 is attributable the internet, which, also
contributed to the 10% increase in productivity for small and medium businesses.
The contribution of Information and Communication Technologies (ICTs) in economic growth is further explored in the
2015 Global Information Technology Report of the World Economic forum. The report reveals that decreases in global
poverty is correlated with growth in ICT adoption. However, so far it is mostly the rich countries that have been
benefiting from the technologies.
Fixed-line and mobile broadband penetration is significantly lower in developing countries. Statistics show that the
majority of the 4.2 billion non-internet users worldwide are from developing countries and this can be linked to a
study by McKinsey on The Barriers to Internet Adoption in 2014 where incentives, low incomes and affordability, user
capability, and infrastructure were enumerated as the factors preventing the offline community from connecting to the
internet. Of these, low incomes and affordability of providing and availing broadband service was listed as the
predominant factor.
The internet, however, has great potential to foster economic growth in these areas.
According to a research by the World Bank in 2009, for every 10 percentage point increase in the number of high-
speed internet users in a developing country there is an increase of 1.3 percentage points in economic growth.
On the other hand, the trends associated with growth in the online population were listed as an increase in mobile
network coverage & mobile internet adoption, urbanization, shrinking data and device prices along with the rising
middle class and the increasing utility of the internet.
METHODOLOGY
1. A comprehensive list of all developing countries, along with the necessary data for this study, shall be formed and
grouped according to continent, in order to have an organized database of countries which fit the criteria for
evaluation.
2. Stratified random sampling without replacement shall be applied to create the population sample and decrease
the total number of countries under review to thirty (30). However, the sample size was later reduced to twenty
(20) due to lack of sufficient data.
a. Due to extremely large amounts of data, the evaluation of all developing countries was deemed
impracticable. Moreover, based on the central limit theorem, a sample size of thirty (30) would be sufficient
to approximate it the population. In addition, a sub-theorem explains that whenever the population is in
itself normally distributed, then the samples will also have a normal distribution for any sample size n(even
those less than 30)
b. However, due to the incompleteness of data, a sample size of twenty (20) was used instead while still
maintaining the approximation to the population .
c. The number of countries taken from each continent is based on the proportion of the number of developing
countries in the continent to the total number of developing countries in the world.
d. This presupposes that the population per country should not affect the likelihood of it being chosen, in order
to place equal weights to each country similar to the concept of the electoral college.
3. The selection of which countries will be evaluated per continent shall be determined through random selection.
a. Countries per continent are listed alphabetically and numbered accordingly in an increasing manner (1,2,3,
and so on).
b. Excel’s rand function was used to determine the corresponding numbers of the countries to be included. For
example, if there are six (6) developing countries in a continent, excel will generate a random number from
1 to 6 to determine which will be chosen. From there, the remaining five (5) will be numbered 1 to 5 and
excel will generate a random number from 1 to 5 to see which country will be chosen next. This process is
repeated per continent until the proportionally appropriate number of countries have been gathered per
continent, which comprises a total sample size of twenty (20).
c. In the case when the selected country lacks sufficient data, this country will be dropped and another country
from the same continent will be randomly chosen to replace it.
4. Repetitive multiple regression analysis shall be employed to determine the significant factors from those
otherwise. Insignificant factors per iteration are then removed until a regression model with only significant
factors is achieved.
a. The factor which is found to be the most insignificant (based on its p- value) would be eliminated from the
regression model for the next iteration. This is done until all remaining factors are found to be significant.
ANALYSIS
Regression Analysis - all regression tests are conducted at a 95% confidence level.
The dependent variable for the following regression analysis is the percentage of internet users in a developing
country. A total of five explanatory variables are to be included:
According to McKinsey’s study on barriers to internet adoption, approximately 100% of the online
Literacy population can read and write. In addition, a study by H. Ünver shows an empirical and positive
Rate (X1) correlation between the level of education and internet penetration in a country. Literacy rate, therefore,
can be used as a measure of user capability which plays a role in determining internet usage.
Based on the United Nations report, Inequality on the Rise, “wide economic gaps are preventing poorer
countries from taking full advantage of the globalization process.” As such, it is implied that low wealth
or income may negatively affect a country’s internet usage.
Gross
Domestic The GDP per capita was preferred over the Gross National Income per capita (GNI per capita) because
Product GDP per capita looks at productivity and wealth based on the people living in a certain place while GNI
(GDP) per per capita looks at productivity and wealth of nationalities. This means that GDP is physically restricted to
capita (X2) people within a certain country while GNP cuts across nations and includes remittances of overseas
workers of a country. Since internet usage in this paper is analyzed on a per country basis, meaning
foreigners in a country are included in the country of residence and not in the country of birth or
citizenship, then GDP per capita more closely approximates this rather than GNP per capita.
Closely related to the GDP per capita is the Gini Coefficient. According to North Carolina Central
University(NCCU), the Gini Coefficient measures income inequality. This means that while GDP per
Gini
capita provides an average amount per person, Gini Coefficient determines the distribution of that
Coefficient
wealth. Although the Gini Coefficient would be very useful in this study, it has not been included
(not
because the Gini Coefficient can be arrived at in different ways, making comparison among countries
included)
erroneous as different countries may solve for the Gini Coefficients differently from each other as also
cited in the NCCU lecture.
In economics, the price of a good is inversely related to the demand for it, because expenditure for a
Internet commodity is limited by disposable income (Income and Substitution Effects, 2016). Thus, it is
Price (X3) hypothesized that high internet connection prices significantly prevent the citizens of low- income
countries from gaining access to it.
Average internet speed reflects the level of investment in internet-related infrastructure in a country.
Internet
Faster internet is generally associated with more productivity, and therefore can be determinant of
Speed (X4)
usage especially in the business sector.
The majority of offline communities are concentrated in rural areas, where it is more difficult to provide
Percentage
access to the internet because low population density in these areas generally discourage private service
of Urban
providers from investing in the infrastructure needed due to lower revenues (compared to dense urban
Pop'n (X5)
areas, where there is a higher return for less investment)
H0: β1 = β2 = β3 = β4 = β5 = 0
HA: βi ≠ 0, at least one i, i = 1,2,3,4,5
The first regression, the full model is used, makes use of all five regressors. The model for this regression is:
Upon initial regression, it is notable that the model has a low adjusted r-squared of .197. Related to this is the very
high p- value of .978 of the constant term. However, there is an indication that the model must always pass through
the origin as it is assumed that those who cannot afford nor understand the internet would not use it. Thus, whenever
the explanatory variables GDP and literacy rate were to fall to zero, it is likely that there would be no internet usage at
all for the whole country (Usage Note 23136, n.d.). Knowing this, the constant term is set to zero and the regression is
done again. This time, the model gained a high adjusted r-squared of .765.
The revised model for this regression is
Among the regressors, it was found that the percentage of urban population in a developing country has the least
significant relationship with the percentage of internet users, having the largest p- value of .85. It is possible that
several underlying factors related to infrastructure (distribution of cell sites, etc.) may not be fully captured by this
variable.
The second regression excludes the percentage of urban population as an explanatory variable.
The model for this regression is:
The new model exhibited a better overall significance, as evidenced by the increase in the F statistic over the previous
one. Among the remaining regressors, the average connection speed has the least significant linear relationship with
the percentage of internet users, with a p- value of .67. From this result, it can be inferred that the quality of internet
connection is not a determinant of the demand for internet services.
The third regression does not include the average connection speed as an explanatory variable.
The model for this regression is:
The fourth regression removes the average internet price, leaving the model with only GDP per capita and literacy rate
as the explanatory variables.
The model for this regression is:
Ŷ = 0.43409895X1 + 0.002616962426X2
The new model displayed an increased overall significance over the previous ones, as indicated by the increase in the
F statistic. It is found that GDP per capita does not have a significant linear relationship with the percentage of
internet users, with a p- value of .11. Literacy rate has a p-value of .001, indicative of a significant relationship with
the dependent variable.
The last regression makes use of literacy rate as the only explanatory variable.
The model for this regression is:
Ŷ = 0.6002631357X1
This achieves the highest overall significance among the regression models used, and is able to account for 84% of
the variation in the dependent variable (see r-squared). It is found that literacy rate exhibits a positive linear
relationship with the percentage of internet users among developing countries, concurrent with the alternative
hypothesis presented.
CONCLUSION
The internet is a strong contributor to a country’s growth and development. However, the economic difficulties poorer
countries experience prevent them from taking full advantage of globalization, including the use of the internet.
Since developing countries are characterized by low wealth and income, there is a need to find factors other than
wealth (as represented by GDP per capita) which may boost internet usage.
From the results of the regression analysis, it is found that literacy rate has a positive relationship with the percentage
of internet users in developing countries. Thus, it is imperative for governments of developing countries to address
their literacy rates to increase the internet users among their populace. Moreover, GDP per capita, the percentage of
urban population, average internet speed, and average internet price are not found to be related to the percentage of
users. The insignificance of the GDP per capita may be due to the fact that all developing countries are already
classified as low-income, and any differences in the GDP per capita would be immaterial as long as they are still
classified under developing countries.
The study could be further expanded by exploring other factors affecting internet usage, such as government
regulation or culture. Information on how citizens specifically make use of the internet such as work, socializing, and
gaming would also allow for a better insight in the nature of internet usage in developing countries.
APPENDIX
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 1.056149114 36.88966679 0.02862994454 0.9775638517 -78.06431713 80.17661536 -78.06431713 80.17661536
Literacy Rate -1.084824325 2.49972732 -0.4339770649 0.6709182778 -6.446206204 4.276557554 -6.446206204 4.276557554
GDP Per Capita -0.07212792344 0.1253669565 -0.5753344058 0.5741964136 -0.3410133029 0.196757456 -0.3410133029 0.196757456
Average internet
-0.0931001656 0.5017592645 -0.185547477 0.8554610309 -1.169266757 0.9830664255 -1.169266757 0.9830664255
price/Mbps
Average Connection
0.00242257956 0.002363511418 1.024991689 0.3227524988 -0.002646648265 0.007491807386 -0.002646648265 0.007491807386
Speed
Percentage of
0.5948695434 0.46059855 1.291514147 0.2174418132 -0.3930160952 1.582755182 -0.3930160952 1.582755182
Urban Pop'n
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A
Literacy Rate 0.6030688483 0.3485167356 1.730387057 0.104074935 -0.1397769893 1.345914686 -0.1397769893 1.345914686
GDP Per Capita 0.002399144739 0.002142124725 1.119983683 0.2803338118 -0.002166686032 0.00696497551 -0.002166686032 0.00696497551
Average internet
-0.07013766248 0.1007932 -0.6958570866 0.4971591503 -0.2849732827 0.1446979578 -0.2849732827 0.1446979578
price/Mbps
Average Connection
-1.065250156 2.322950638 -0.4585763203 0.6531125423 -6.016502237 3.886001926 -6.016502237 3.886001926
Speed
Percentage of
-0.08859069975 0.4602559516 -0.1924813779 0.849946884 -1.069603039 0.8924216392 -1.069603039 0.8924216392
Urban Pop'n
WITHOUT URBAN POP’N - SUMMARY OUTPUT
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A
Literacy Rate 0.5481423531 0.1939694851 2.825920545 0.01217222497 0.1369454137 0.9593392925 0.1369454137 0.9593392925
GDP Per Capita 0.002174922256 0.001742755687 1.247978861 0.2299943077 -0.001519554759 0.005869399271 -0.001519554759 0.005869399271
Average internet
price/Mbps -0.06727690832 0.09664491619 -0.6961246486 0.4963394473 -0.2721549783 0.1376011617 -0.2721549783 0.1376011617
Average
Connection Speed -0.9152859434 2.121522666 -0.4314287836 0.6719134214 -5.412713086 3.5821412 -5.412713086 3.5821412
R Square 0.8649818472
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
GDP Per
0.002204986286 0.001699167178 1.297686487 0.2117280868 -0.001379943096 0.005789915668 -0.001379943096 0.005789915668
Capita
Average
internet -0.06242553928 0.09366261324 -0.6664936747 0.5140399402 -0.2600363798 0.1351853012 -0.2600363798 0.1351853012
price/Mbps
WITHOUT URBAN POP’N, AVE. SPEED, & AVE. COSTS - SUMMARY
R Square 0.8614537926
ANOVA
Adjusted R Square 0.7982012255
df SS MS F Significance F
Standard
Coefficients t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Error
Literacy
0.43409895 0.1144131473 3.7941352030.001328641549 0.1937258471 0.6744720529 0.1937258471 0.6744720529
Rate
GDP Per
0.0026169624260.0015581210961.679562926 0.1103157088 -0.00065652852490.005890453377-0.0006565285249 0.005890453377
Capita
WITHOUT URBAN POP’N, AVE. SPEED, AVE. COSTS, & GDP per Capita - SUMMARY OUTPUT
R Square 0.8397410494
Standard
Coefficients t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Error
Literacy 0.000000005
0.6002631357 0.06015937667 9.97788157 0.4743481133 0.7261781582 0.4743481133 0.7261781582
Rate 454077585
Percentage Average Average Percentage
Literacy GDP Per GNI Per
Country of Net internet Connection of Urban
Rate Capita Capita*
Users price/Mbps Speed Pop'n
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