Productivity is higher among some service firms when broadband becomes available, but not all. ESRI Research Bulletin 2019/04

Haller, Stefanie A. and Lyons, Sean (2019) Productivity is higher among some service firms when broadband becomes available, but not all. ESRI Research Bulletin 2019/04. UNSPECIFIED.

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Abstract

Using internet services over broadband connections may help some firms become more productive, generating more output from a given amount of labour and capital equipment. However, there is mixed evidence internationally about how large this benefit has been in practice and which types of firms are most likely to improve their productivity by using these technologies. In this research we examine the effects of broadband availability on the productivity of service sector firms. Some previous studies using region- or country-level data have reported large productivity effects of broadband on services, but it is hard for this type of study to prove that broadband is making firms more productive. For example, their results might partly be explained by factors that both make firms more productive and more likely to use broadband, rather than a causal link from one to the other. Studies using data on firms have tended to find little evidence that there are broad-based gains from this source.2 Our research tries to unpack the service sector to see whether there are identifiable groups of firms that register significant productivity gains after broadband becomes available to them. Knowing more about how large and focused these benefits are should help policymakers predict the likely effects of programmes to bring high-speed broadband to less well-served areas.

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