The contingent nature of broadband as an engine for business startups in rural areas

Abstract

AbstractThe introduction of the Internet in the 2000s was believed to be an effective solution for helping rural economies but previous studies found mixed results. Following the prevailing COVID‐19 pandemic, the idea has surfaced that broadband accessibility would result in an increasing number of people and firms relocating to smaller towns and rural areas. In this study, we provide new evidence on the impact of ultrafast broadband on rural economies by considering industrial and spatial heterogeneity. To achieve this, we evaluated the impact of the French Very High‐Speed Broadband Plan on business startups in rural municipalities between 2013 and 2018 using difference‐in‐differences with prematching. The evidence reveals that positive broadband effects are limited to municipalities with good initial conditions in terms of local economic climate, natural amenities, and demographics. From a policy perspective, our results suggest that broadband is not a panacea, and focusing on broadband access only is likely to have little impact in structurally weak rural areas.