Spatial impact of information technology development

Concentrating on the property of information infrastructure, this paper examines the impact of publicly funded technology development on the spatial allocation of population and social welfare. Information and communication technologies attract much attention as elements of change in regional systems, industrial structures and in determining the allocation of economic activities. In particular, the expansion of information networks is expected to reduce the over-concentration of population in a built up region. In this paper, modeling the network effects and technology effects of information infrastructure supply, we firstly show that technology development may not necessarily encourage the dispersal of economic activities. Secondly, we derive an optimal rule for the central government to develop the infrastructure of information and communication. The results imply that the central government has a key role to play in ensuring the compatibility of household dispersion and an increase in the social welfare.