| By: |
Kim, Younjun;
Orazem, Peter |
| Abstract: |
The availability of broadband Internet service should have increased firm
productivity and lowered firm entry costs. However, validating the broadband
effect is complicated by the rapid deployment of broadband Internet service
across metropolitan areas, removing meaningful variation in broadband
availability. Deployment in rural markets was much more uneven, suggesting
that the presence or absence of broadband service may have altered the site
selection of firms targeting rural markets. We investigate the effect of
broadband availability on firm location decision in rural Iowa. We establish
a counterfactual baseline firm entry rate for each zip code area in rural
counties by showing how the presence of broadband service in a ZIP code in
2001 affected firm entry in 1990-1992 before Broadband was available. We then
measure how the actual presence of broadband service in the same ZIP code
affected firm entry in 2000-2002. We show that the difference in estimated
probability of entry between the counterfactual baseline and the actual
response ten years later is the Difference-in-Differences estimate of the
effect of broadband deployment on firm start-ups. We find that broadband
availability in a rural ZIP code has a positive and significant effect on firm
entry in the ZIP code but only in rural markets adjacent to a metropolitan
area or with a larger urban population. Broadband access does not affect new
firm entry in more remote rural markets |
| Keywords: |
Internet; Rural; urban; : broadband; firm entry; metropolitan area |
| JEL: |
M13 O33 R11 |
| Date: |
2012–12–03 |
| URL: |
http://d.repec.org/n?u=RePEc:isu:genres:35696&r=tid |