Broadband's Contribution to Economic Health in Rural Areas: A Causal Analysis

Abstract

The diffusion of broadband Internet access across America during the 2000s brought with it a significant amount of concern that rural areas might be left behind in terms of the availability, adoption, and benefits of this technology. i. The presence of a rural-urban broadband “digital divide” is well documented in the economic literature. ii. Several studies have suggested that broadband access positively impacts employment as well as other quality of life issues (health care, education, social linkages) in rural areas; iii. however, many analyses were based on hypothetical assumptions or case studies. State and federal policies related to broadband investment and deployment remain contested. As the funds flowing to additional advanced broadband infrastructure under the American Reinvestment and Recovery Act end and as the FCC initiates changes to universal service, questions regarding where American broadband infrastructure stands and how high speed capability contributes to economic development are receiving new attention. Better data from the NTIA/Census Current Population Supplements and the more detailed data from NTIA’s investments in statewide mapping can be used to provide better responses to questions regarding broadband’s contributions to economic health. This paper uses the latest data on both broadband availability and adoption to empirically gauge the contribution of broadband to the economic health of rural areas. We utilize availability data from the National Broadband Map aggregated to county level, and county-level adoption data from Federal Communication Commission’s Form 477. Economic health variables of interest are gathered from a variety of sources and include median household income, number of firms with paid employees, total employed, percentage in poverty, and the percentage of employees classified as either creative class or non-farm proprietors. A propensity score matching technique (between a “treated” group and a control group) is used to make causal statements regarding broadband and economic health. We measure whether the growth rates between 2001 and 2010 for different economic measures are statistically different for the treated and non-treated groups, restricting the analysis to non-metropolitan counties. Results suggest that high levels of broadband adoption in rural areas do causally (and positively) impact income growth between 2001 and 2010 as well as (negatively) influence poverty and unemployment growth. Similarly, low levels of broadband adoption in rural areas lead to declines in the number of firms and total employment numbers in the county. Broadband availability measures (as opposed to adoption) demonstrate only limited impact in the results. We also use the FCC data to assess whether Connected Nation participants in two states achieved higher increases in broadband providers or adoption rates when compared to similar counties that did not participate in the program. We find that the program has a dramatic influence on the number of residential broadband providers in non-metro counties but no impact on increases in broadband adoption rates compared to otherwise similar non-participating counties. Consequently, there is no particular effect on economic growth. This research offers an empirical documentation of the causal relationship between broadband and economic growth in rural areas, and offers an outside assessment of the highly visible Connected Nation program. It meshes the latest data on availability with that for adoption, and incorporates a technique that can make causal claims about how broadband affects specific measures of economic health. Thresholds for adoption / availability can be identified as having measurable impact on economic growth rates in rural areas, which leads to policy prescriptions. NOTES: i Malecki, 2003; Parker, 2000; Strover, 2001. ii Whitacre and Mills, 2007; Dickes, Lamie and Whitacre, 2010; Strover, 2011. iii Katz and Suter, 2009; LaRose et al., 2008, Stenberg et al., 2009.