Broadband internet availability and establishments\u2019 employment growth in Germany: evidence from instrumental variables estimations

Bastian Stockinger

doi:10.1186/s12651-019-0257-0

Abstract

This study investigates the effect of broadband internet availability on German establishments’ employment growth. The database used is a random sample of business establishments, augmented by the local availability of broadband. The observation period is 2005–2010, when broadband was introduced in rural regions of Western Germany and in large parts of Eastern Germany. For the Western German subsample, technical frictions in broadband rollout are exploited to obtain exogenous variation in broadband availability. The findings indicate a negative (albeit not very robust) employment growth effect of broadband availability for Western German manufacturers, and a robustly positive effect for Western German service establishments, including most knowledge-intensive industries. For Eastern Germany, a similar identification strategy is potentially available, but turns out invalid in this particular setting. An alternative identification approach (a long difference model) indicates positive employment growth effects in both sectors for Eastern Germany. Overall, the findings suggest that broadband expansion has helped create jobs in firms which use broadband intensely.

Highlights

The expansion of broadband internet is one of the most important current developments in the technological infrastructure of industrialized countries
6 Conclusions This article investigates the effect of broadband internet availability on the employment growth of German business establishments in the period 2005–2010
Technical frictions which impeded the rollout of broadband in rural Western Germany are used to construct an instrumental variable for local broadband availability, largely following Falck et al (2014)

Summary

Introduction

The expansion of broadband internet is one of the most important current developments in the technological infrastructure of industrialized countries. Stockinger J Labour Market Res (2019) 53:7 et al 2010; Einav et al 2014), with theoretically ambiguous implications for employment in online retail and stationary retail. Another channel could be labor supply and matching effects working through a more efficient job search (e.g., Autor 2001; Kuhn and Skuterud 2004). The study addresses effect heterogeneity between sectors and on knowledge-intensive industries in particular, to obtain a clearer impression of the channels through which broadband may affect establishments’ employment growth.

Broadband and the labor market: previous research

Identification strategy

Estimation results and discussion

Findings

Conclusions