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Does state aid for broadband deployment in rural areas close the digital and economic divide?

Author

Listed:
  • Briglauer, Wolfgang
  • Duerr, Niklas S.
  • Falck, Oliver
  • Hueschelrath, Kai
Abstract
We evaluate the impact of a major European state aid programme for speed upgrades in broadband inter net availability applied to rural areas in the German state of Bavaria throughout 2010 and 2011. We use a matched difference-in-differences estimation strategy that compares treated and untreated municipalities that are balanced with respect to funding criteria. We find that aided municipalities have a significantly higher broadband coverage at higher speed than non-aided municipalities. This increase in broadband coverage does not, on average, benefit the local population in terms of increase in local jobs per resident or wages. However, these effects are heterogeneous across skill groups. Furthermore, we find positive effects on the employment rate among residents. Taking these results together suggests that an increase in broadband coverage through state aid protects rural areas from depopulation (while residents work at other locations), but does not contribute to a further closing of the economic divide in the form of creating new jobs. (C) 2019 Elsevier B.V. All rights reserved.

Suggested Citation

  • Briglauer, Wolfgang & Duerr, Niklas S. & Falck, Oliver & Hueschelrath, Kai, 2019. "Does state aid for broadband deployment in rural areas close the digital and economic divide?," Munich Reprints in Economics 78272, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:78272
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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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