Local Economic Impacts of Investments in Community Technology Centers: An Empirical Investigation

Abstract

The objective of this study is to analyze the local economic impact of investments in community technology centers (CTSs). More broadly, it asks the question whether investments in CTCs are primarily motivated by considerations of equity and social justice, or whether there is an economic rationale that can justify such investments.The community technology center movement has a long pedigree, both in the United States and abroad. Historically, their motivation was to extend information and communication technology (ICT) access and training services to communities and individuals deprived of such services because of low socioeconomic status or lack of digital literacy. In effect, they were seen as universal service programs for those who could not afford household ICT access. However, CTCs also provided a host of services that might have economic consequences: digital literacy training, small business services, job training, etc. These services may cumulatively be expected to have effects on local economic growth, through encouraging small business entrepreneurship, lowering unemployment and enhancing local labor skills. Identifying the magnitude of these economic consequences, if any, is critical to ensuring continuing public support to CTCs.The relationship between telecommunications and economic growth has been long recognized in the economics literature, ever since Jipp’s pioneering work found a positive correlation between telephone density in a country and per capita Gross Domestic Product (GDP). By substituting for other production inputs and reducing transaction costs, telecommunications contributes to economic growth. Growth in turn makes more investment capital available for telecommunications development and also contributes to demand by increasing household income. However, establishing a connection between CTC investments and economic growth is harder, and has not been explicitly addressed in the literature. Analysis of the economic consequences of investments in CTCs is also complicated by lack of quality data as well as methodological issues. Data availability is a major concern, since no centralized database of CTC investments exists — most CTCs are run by a wide variety of entities including municipalities and city governments, charitable foundations, industry and trade groups, and public libraries. To solve this problem, we use data on CTCs from two sources that provide information on subsets of all CTCs: data for CTCs attached to public libraries are available from the Institute of Museum and Library Services (IMLS); and data from the National Broadband Map (NBM) for Public Computing Centers (PCCs) funded through the Broadband Technology Opportunities Program (BTOP). The IMLS data tracks individual libraries and PCCs and logs the types of services available at each location, including digital literacy courses and general education assistance. The NMB data includes the periodic reports to the NTIA from recipients of PCC grants about the number of new and improved PCCs, the number of new and upgraded workstations available to the public, hours of operation, average connection speed, primary uses of the PCCs, average users per day, and training provided with BTOP funds. We supplement this with information on broadband availability from the National Broadband Map; and socioeconomic and demographic information from the U.S. Bureau of the Census such as poverty level, average income, average household size of the region, and geographic data such as population and the ratio of the population living in rural areas.In terms of method, models for the economic consequences of ICT and broadband deployment need to account for the simultaneity bias and spurious correlation. The incremental economic effect of CTCs needs to be isolated from that of the availability of broadband and ICTs in the wider community; it needs to rule out reverse causality, namely the tendency of wealthier communities to invest more in all public infrastructures including CTCs; and it needs to control for trends in the overall national and regional economies. Our paper utilizes an econometric model that addresses these methodological issues using appropriate controls and instrumental variables. The outcome of this research will provide inputs into the relative merits of the investments of scarce public resources into CTCs or other public infrastructure investments. It has significant implications for public policies aiming at universal broadband access through middle mile institutions, as well as for the creation of community resources and local development.