The Effects of Broadband Internet on Employment and Wages

Abstract

This article examines how high-speed internet development across Chinese provinces affects firm employment and average annual wages. The authors exploit a national policy reform by which the government launched a project to improve internet speed in 2000 and devise a difference-in-differences with a continuous treatment method for empirical identification. The authors first find that high-speed internet significantly increases employment and slightly reduces average wages. Specifically, after one percentage point increase in the number of fixed-line users per capita at the province level, there is a 0.14 percent increase in firm employment and a 0.06 percent decrease in average wages, respectively. Also, this paper shows that the gains and losses from high-speed internet on firm performance are likely to have risen from the higher probability of firm entry and the improvement of productivity in existing firms. Third, the authors find rich heterogeneity across firm ownership, size, and regional characteristics.