Broadband Infrastructure and Economic Growth

Abstract

We estimate the effect of broadband infrastructure, which enables high‐speed internet, on economic growth in the panel of OECD countries in 1996–2007. Our instrumental variable model derives its non‐linear first stage from a logistic diffusion model where pre‐existing voice telephony and cable TV networks predict maximum broadband penetration. We find that a 10 percentage point increase in broadband penetration raised annual per capita growth by 0.9–1.5 percentage points. Results are robust to country and year fixed effects and controlling for linear second‐stage effects of our instruments. We verify that our instruments predict broadband penetration but not diffusion of contemporaneous technologies like mobile telephony and computers.