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Erratum The original edition of this book, published in January 2016, contained an incorrect endnote 4 on page 197. It has been corrected in this edition. Library of Congress Cataloging-in-Publication data has been requested.v xiii Foreword xv Acknowledgments xix Abbreviations 1 Overview Strengthening the analog foundation of the digital revolution 5 Digital transationsdigital divides 8 How the internet promotes development 11 The dividends Growth, jobs, and service delivery 18 The risks Concentration, inequality, and control 25 Making the internet universal, affordable, open, and safe 29 Analog complements for a digital economy 36 Global cooperation to solve global problems 38 Reaping digital dividends for everyone 38 Notes 39 References 42 Spotlight 1 How the internet promotes development 49 Part 1 Facts and analysis 50 Chapter 1 Accelerating growth 51 Connected businesses 55 More trade, higher productivity, and greater competition 70 Digital technologies can lead fi rms and countries to diverge 73 The nexus of technology and regulation 80 The future of markets 82 Notes 85 References 90 Sector focus 1 Agriculture 94 Spotlight 2 Digital fi nance 100 Chapter 2 Expanding opportunities 101 Connected people 104 Creating jobs, boosting labor productivity, and benefi ting consumers 118 Labor market polarization can lead to greater inequality 120 The race between skills and technology Contentsvi CONTENTS 130 The future of jobs 135 Notes 138 References 146 Sector focus 2 Education 148 Spotlight 3 Social media 152 Chapter 3 Delivering services 153 Connected governments 155 Greater state capability and citizen participation 171 Digital technologies too often fail to empower citizens 177 The gap between technology and institutions 181 The future of public services 181 Notes 183 References 190 Sector focus 3 e-health 194 Spotlight 4 Digital identity 199 Part 2 Policies 200 Chapter 4 Sectoral policies 200 Making the internet universal, affordable, open, and safe 203 Shaping the digital economy 204 Supply-side policies Availability, accessibility, and affordability 221 Demand-side policies Open and safe internet use 228 Promoting the digital economy 232 Notes 235 References 240 Sector focus 4 Smart cities 244 Spotlight 5 The data revolution 248 Chapter 5 National priorities 248 Analog foundations for a digital economy 249 The interdependence between technology and complements 253 Regulations Helping businesses connect and compete 258 Skills Making the internet work for everyone 272 Institutions Connecting for a capable and accountable government 279 Digital safeguards 281 Notes 282 References 288 Sector focus 5 Energy 292 Chapter 6 Global cooperation 292 Internet governance 297 Toward a global digital market 303 Leveraging ination for sustainable development 317 Notes 318 References 322 Sector focus 6 Environmental management 326 Spotlight 6 Six digital technologies to watchvii CONTENTS O.1 5 Frequently asked questions The Report at a glance O.2 10 e-commerce with Chinese characteristics Inclusion, effi ciency, and innovation in Taobao villages O.3 15 Bridging the disability divide through digital technologies O.4 16 Digital dividends and the bottom billion O.5 20 What Facebook “Likes” revealthe convenience-privacy trade-off O.6 26 Nailing Jell-O to the wallrestrictions on the fl ow of ination O.7 27 Is the internet a public good O.8 27 The four digital enablers O.9 29 Technology and complements Lessons from academic research O.10 32 Opening the M-Pesa mobile money plat to competition O.11 33 Mobilizing technology in teaching in Rio’s Educopedia O.12 35 Can continuous monitoring and small sanctions improve provider perance O.13 37 European Union A fragmented market for digital trade S1.1 45 Three ways in which the internet promotes development 1.1 56 Tracing back growth to a single, new technology suffers from severe measurement problems 1.2 57 Is this time different Predicting labor productivity growth at the technological frontier based on lessons from past industrial revolutions 1.3 59 Is the internet reshaping economic geography Not yet. 1.4 61 Successful online plats account for local context and institutions 1.5 63 The growth impact is largest when fi rms in traditional sectors use digital technologies to modernize their business 1.6 65 Do digital technologies embed productivity externalities 1.7 69 Much of the benefi t from the internet is unmeasured S2.1 95 Innovations in digital payments S2.2 98 Technology can help unveil illicit money fl ows 2.1 109 Business process outsourcing and jobs in the Philippines Opportunities and challenges from technological change 2.2 110 The economics of online outsourcing 2.3 112 Expanding opportunities through online music 2.4 114 Bridging the disability divide through digital technologies 2.5 115 Using digital technologies to match workers with jobs Souktel in West Bank and Gaza 2.6 116 The impact of digital technologies on remittances 2.7 123 Skills wanted Key concepts 2.8 129 Concerns about technological unemployment are not new 2.9 133 The challenge of keeping up with new technologies in Mexico 2.10 134 Digital technologies and economic opportunities A gender lens 3.1 158 Digital technology and crisis management 3.2 159 Empowering women through digitally enabled social programs 3.3 160 Targeted public transit benefi ts in Bogot 3.4 161 Streamlining services through one-stop service centers3.5 165 The high failure rate of e-government projects 3.6 169 Digitally enabled teacher management in private schools 3.7 173 Improving the integrity of elections through crowdsourcing and collaboration 3.8 178 Digital technologies can strengthen control 4.1 201 Policy challenges for digital development 4.2 204 Is the internet a public good 4.3 207 Fragile states, resilient digital economies 4.4 209 How public-private partnership helped build the internet backbone in the Republic of Korea 4.5 212 The last 1,000 miles 4.6 215 Guatemala An early pioneer of spectrum auctions 4.7 219 How better ICT data can lead to cheaper services 4.8 223 The costs of cybercrime 4.9 229 Tech hubs in Africa 4.10 231 Israel as a startup nation S5.1 245 “Big data” and open data in action Boxesviii CONTENTS 5.1 250 Three ideas about the interaction between technology and its complements 5.2 257 Mobile money A success story and yet a regulatory minefi eld 5.3 261 The impact of digital technologies on cognitive capacities and socialization 5.4 261 One Laptop per Child Strengthening analog foundations and careful uation 5.5 263 Khan Academy A supplemental educational resource in and outside the classroom 5.6 264 Using digital technologies to foster collaboration and learning Rio de Janeiro’s Educopedia 5.7 265 Emerging lessons from digital literacy programs 5.8 267 Building new economy skills Escuela Nueva in Colombia and Vietnam 5.9 269 Building modern skills Game-based learning and “gamifying” education 5.10 271 Massive open online courses MOOCs A promising tool for lifelong learning 5.11 276 Increasing the impact of e-government systems 5.12 277 Regular, small-stakes monitoring 5.13 279 Estonia’s X-Road 6.1 294 Categories of stakeholders in internet governance 6.2 297 European Union A fragmented market for digital products 6.3 307 The Social Observatory and P-tracking 6.4 309 ICTs and the Sustainable Development Goals 6.5 310 Digital Green “How-to” videos for agriculture and health 6.6 312 Disaster risk management 6.7 314 Can “big data” provide real-time, geographically detailed ination on poverty 6.8 316 Disruptive approaches to development S6.1 329 Using cellphones for medical diagnosis, thanks to 3D printing Figures O.1 3 Digital technologies have spread rapidly in much of the world O.2 3 The pessimism concerning the global outlook is not because of digital technologies, but in spite of them O.3 4 Why digital dividends are not spreading rapidlyand what can be done O.4 6 Digital transation in action O.5 8 The internet remains unavailable, inaccessible, and unaffordable to a majority of the world’s population O.6 9 The digital divide in access is high in Africa, and the divide in capability is high in the European Union O.7 9 The internet promotes development through three main mechanisms O.8 11 Many digital transactions involve all three mechanisms and a two-sided market O.9 12 How the three mechanisms apply to businesses, people, and governments O.10 13 The size of the ICT sector and its contribution to GDP growth is still relatively modest O.11 13 Vietnamese fi rms using e-commerce have higher TFP growth, 2007–12 O.12 18 More complaints were resolved more quickly in the Nairobi water utility after the introduction of digital customer feedback O.13 18 Without strong analog complements, opportunities may turn into risks O.14 19 Factors explaining the lower adoption of digital technologies by businesses O.15 21 Labor shares of national income are falling in many countries, including some developing countries O.16 21 Falling labor shares in national income are associated with rising inequality O.17 22 The labor market is becoming more polarized in many developing countries O.18 23 From a technological standpoint, two-thirds of all jobs are susceptible to automation in the developing world, but the effects are moderated by lower wages and slower technology adoption O.19 25 Internet voting can increase voter participation but can be biased toward more privileged groups BO.6.1 26 Autocratic governments have promoted e-government while censoring the internet O.20 28 A policy framework for improving connectivity O.21 30 The quality of complements and technology rises with incomes O.22 31 Policy priorities for countries that are emerging, transitioning, or transing O.23 33 The types of skills needed in a modern economyix CONTENTS O.24 35 Digital safeguards in the WDR’s framework S1.1 44 Internet users trade personal data for useful services SB1.1.1 45 A graphic representation of how the internet promotes development 1.1 51 A framework for the internet and economic growth 1.2 52 More fi rms are using broadband internet 1.3 53 Many advanced digital technologies have not yet diffused across fi rms in high-income countries, 2014 1.4 54 Higher-productivity fi rms are more likely to use the internet, 2010–141.5 54 African fi rms using the internet are more productive, 2014 1.6 55 Larger fi rms use the internet more intensively across all income groups, 2006–14 1.7 57 ICT capital accounted for nearly one- fi fth of global growth, 1995–2014 B1.2.1 58 U.S. labor productivity during the electrifi cation era 1890–1940 shares remarkably common patterns with the ICT era 1970–2012 1.8 60 The internet enables more fi rms to reach new markets, 2001–12 B1.5.1 63 The ICT sector accounts for 4–7 percent of GDP in most OECD countries, 20111. 9 65 Vietnamese fi rms using e-commerce have higher TFP growth, 2007–12 1.10 67 Firm entry rates rose after countries introduced online registration systems, 2006–12 1.11 67 Two out of three fi rms report competit