Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/312105 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11595
Publisher: 
CESifo GmbH, Munich
Abstract: 
Governments worldwide subsidize rural broadband expansion to address the urban-rural connectivity divide, but the economic benefits and costs remain unclear. This paper examines the causal effect of high-speed Internet on real estate prices and evaluates the fiscal effectiveness of rural broadband subsidies. Using a spatial regression discontinuity design and comprehensive micro-data, our identification strategy exploits variation at state borders from German states' broadband expansion policies. We find that high-speed Internet availability (16 Mbit/s) increases rents by 3.8 percent (€17/month) and sale prices by 8 percent (€14,700) compared to slower access at the discontinuity, with diminishing returns at higher speeds. The capitalization effects are demand-driven, as evidenced by increased broadband uptake, migration, and remote work adoption, while property supply remains unaffected. A cost-benefit analysis within the marginal-value-of-public-funds framework shows the economic surplus exceeds deployment costs for 90 percent of households, while property owners benefit from subsidies through higher property prices.
Subjects: 
high-speed broadband internet
real estate prices
capitalization effect
policy evaluation
local public finance
spatial RDD
MVPF
JEL: 
D60
H40
H70
L86
R20
Document Type: 
Working Paper
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