EcoAustria - Institute for Economic Research, Vienna
A broad-scale rollout and adoption of new high-speed broadband networks and services, respectively, is expected to generate innovative services for consumers and create a high potential for productivity increases and economic growth. However, there is no evidence available on the causal impact of both high-speed broadband coverage and adoption on economic outcomes, which we measure as gross domestic product (GDP). Moreover, no study has yet simultaneously considered the impact of both new wireline broadband based on fiber-optic technologies and new wireless (mobile) broadband based on 3G+/4G technologies. Distinguishing these effects is of crucial relevance for the efficient design of broadband policies. In order to provide reliable evidence on causal effects, we utilize comprehensive panel data for 32 OECD countries for the years 2002-2020 and panel fixed-effects estimators including instrumental variables estimation. Exclusionary restrictions follow from micro-funded determinants of network coverage and consumer adoption decisions. Our results show that both fixed and mobile broadband adoption exert a substantial and significant impact on GDP, while network deployment per se exhibits only minor multiplier-related effects on GDP per capita. Contemporaneous effects of a 1% increase in fixed broadband adoption impact GDP per capita growth in a range of 0.026% to 0.034%, while a 1% increase in mobile broadband adoption contributes between 0.079% and 0.088%. While the impact of contemporaneous mobile broadband adoption is substantially higher, fixed broadband adoption shows stronger dynamic and cumulative effects, as well as larger effects in later deployment periods. Generally, our results are consistent with the notion that the diffusion of technologies to substantial proportions of the population is most important in driving economic growth. Supporting policies should be technology neutral and should not neglect the demand side.