Broadband infrastructure investment in stimulus packages: relevance for developing countries

Abstract

PurposeReviewing a dozen of fiscal stimulus packages in developed countries, this paper analyzes one common strategy that has found widespread support in these stimulus packages and its relevance for developing countries: investing in broadband and next‐generation networks, as a counter‐cyclical tool to create jobs and provide the foundation for economic recovery and long‐term sustained growth.Design/methodology/approachThe paper looks at the various impacts broadband investment is expected to have: short‐term job creation and aggregate demand effects, and long‐term productive activities in other sectors of the economy. Moreover, broadband investment is more fiscally sound than other public spending stimulus options, in the sense of coming closer to, or in some cases actually being, self‐financing.FindingsSeveral factors highlight the potential of broadband infrastructure as an important area of public investment during economic downturn, an option also open to policymakers in developing countries. Spending initiatives on next‐generation telecommunications networks at a time when labor market conditions are particularly weak can help preserve jobs and head off a potential burden on social safety nets. Bringing forward longer‐term aggregate spillover effects of broadband can improve the productivity of the entire economy and is consistent with enhancing longer‐run growth and development. Public support also “crowds in” private investment when access to private financing is decreasing and more expensive.Originality/valueThis is one of the few studies with a focus on the emerging broadband network, its impact on economy and the role of the public sector in rolling out next‐generation networks, during economic downturn and in general. A detailed summary of broadband initiatives in more than a dozen developed countries is provided in the paper.