Estudio Econometrico

Telephone uses in Less Developed Countries


Explaining the correlation and outliers between GDP per Capita and telephone subscriptions

Table of contents


Introduction 3
Defining Less Developed Countries 4
The variables 4
Research question 5
Explaining the (in)dependent variable 6
Figure 1 7
Causal relationship 7
Possible causes for the outlier 8
China 8
Agestructure 9
Geography 9
Oil reserves 10
Political situation 12
Form of government 13
Spread of population 13
Figure 2 Population Density 1 14
Conclusion 16
References 17
Appendix A 19
Appendix B 21






Introduction

In this paper, we will discuss the relationship between Gross Domestic Product (GDP) per Capita and mobile and fixed-line telephone subscribersper 100 people in less developed countries (LDC’s). We think it is interesting to see if there is a correlation between these two variables, and to explain this relationship. Therefore, we will try to answer the following research question: What explains the correlation between GDP per Capita and telephone subscriptions in LDC’s, and what are the possible causes for potential outliers? We will startthis paper by explaining why we chose these two variables. Later on, we will see if there is a correlation between them, and why. Also, we will try to explain possible outliers that might arise in the regression. If there is a Less Developing Country (LDC) that substantially deviates from the linear regression, we will provide possible causes of this occurrence. We will end this paper with aconclusion.

Defining Less Developed Countries

A less developed country mainly is characterized by low levels of living, high rates of population growth, low income per capita, and general economic and technological economies (Todaro & Smith, 2009). These countries are represented in the International Monetary Fund (IMF) of emerging and developing countries, which can be found in Appendix A. Thisappendix will show all LDC countries. However, in analyzing our variables, only LDC’s where data of both GDP per Capita and telephone subscriptions could be found of, is used. A list of these countries and their corresponding values of the variables can be found in Appendix B.


The variables

In this paper, we try to explain the correlations between two variables, namely GDP per capita andtelephone subscriptions. We have chosen these two variables because we think it is interesting to find out whether the number of telephone subscribers partially depends on the amount of income that people make in developing countries. In defining LDC’s, we have explained that development not only depends on income. Therefore, we have a wide range in GDP per capita from $300 (Democratic Republic ofthe Congo) to $39,900 (United Arab Emirates) (IMF, 2007).
By fixed-line subscribers we mean telephone lines that connect a customer’s equipment to the public switched telephone network (The World Bank Group, 2009). Mobile telephones on the other hand, refer to users of portable telephones that have been subscribed to an automatic public mobile telephone service. Therefore, a cellular technologyhas been used that provides access to the public switched telephone network (International Telecommunication Union and World Bank, 2009).
There are several reasons why we chose specifically for telephone subscriptions in developing countries. To begin with, telephone lines are extremely important in these countries. Very often, extensions contribute to the development of LDC’s. There have beencases where areas that were newly introduced to telephone lines solved market imperfections. A good example of this is Bangladesh. There, the microfinance institution ‘The Grameen’ has provided telephone extensions in rural areas in Bangladesh. This increased circumstances for the very poor especially, because now they had access to a telephone, they were able to solve imperfections in the...