Broadband penetration and economic growth: Do policies matter?

Abstract

Although a significant body of literature has examined the interlinkage between broadband penetration and economic growth, the linkage between broadband policies and broadband penetration has been less studied in the literature. In addition, the role of 3G/4G services has also received limited attention. To address this issue, we combine the staggered timing of the implementation of broadband and 3G/4G services across countries and examine its impact on broadband penetration. Relatedly, we also examine the impact of broadband penetration on economic growth and the possible growth drivers. We find that while broadband policies improve fixed broadband penetration, 3G/4G services improve mobile broadband penetration; the magnitude of the latter being nearly three-times that of the former. Besides, we also uncover a positive effect of broadband penetration on economic growth, primarily working through a reduction in broadband prices and well as greater innovation and entrepreneurial activity.