The impact of broadband on poverty reduction in rural Ecuador

Abstract

This study examines the impact of broadband deployment on labor income and employment (in both level and composition) in rural Ecuador. The analysis spans the 2011 to 2019 period, during which the share of rural households covered by high-speed broadband increased from 14.5% to 83%. The empirical strategy exploits variations in the timing of network deployment, as well as the fact that several rural areas remained unserved by 2019. To estimate impact, the study uses a semi-parametric alternative to the standard two-way fixed-effects (TWFE) estimator proposed by Callaway and Sant’Anna (2021). Overall, the findings indicate that broadband deployment in rural areas is associated with measurable gains in labor income and employment. Our income model estimates range from an increase of 14% to 21% above the expected level had broadband not been deployed in these areas. The impact estimates on employment are more modest, ranging from 3% to 5% (depending on the specification) above the mean employment level over the study period. Additionally, our results corroborate that ICTs help diversify employment opportunities, as the share of agricultural employment falls in the connected areas. The findings also suggest that the economic benefits associated with broadband favor younger workers, presumably because their skills better match the newly created jobs.