LAUSR

Abstract This paper adds to the literature on the diffusion of information and communication technology (ICT diffusion) and economic growth by performing a sectorial analysis for a developing country, Tunisia. Particularly, it develops a sectorial ICT diffusion index for Tunisia, which is then used to investigate the relationship between economic growth and ICT diffusion. As developing countries are typically characterized by poor ICT infrastructure, we distinguish between short- and long-term effects of ICT diffusion on economic growth to avoid investment bias, which affects project profitability in the short run. To perform the analysis, we use the panel pooled mean group form of the autoregressive distributed lag model for the period 1997–2015. The analysis yielded two key findings. First, we show that ICT diffusion has a positive long-term effect on Tunisia's economic growth. Second, we find a negative short-term effect, attributable to substantial investment bias. These findings have important policy implications for investors as well as policymakers. Indeed, our sectorial index helps investors identify the sector with highest potential growth after ICT improvement. Further, our analysis can serve as a dashboard for policymakers to foster growth of ICT across sectors.