Broadband and Productivity: Structural Estimates for Germany

Broadband and Productivity: Structural Estimates for Germany

 

 

Tomaso Duso

German Institute for Economic Research (DIW Berlin); TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization; Centre for Economic Policy Research (CEPR)

Mattia Nardotto

KU Leuven

Alexander Schiersch

German Institute for Economic Research (DIW Berlin)

 

Abstract

We study the impact of broadband availability on firms’ total factor productivity (TFP) using German firm-level data between 2010 and 2015. We adopt a control function approach to causally identify and separately estimate productivity for 46 two-digit manufacturing and service sectors. Over the sample period, broadband availability, measured by 16 Mbps transmission rates, more than doubled in German municipalities. While this increased broadband availability has almost no effect on firms’ productivity in manufacturing, it significantly increases TFP in most service sectors. Yet, the size of the effect is heterogenous across industries.