Low-powered vs high-powered incentives: Evidence from German electricity networks

We propose a difference-in-differences approach to estimating the impact of incentives on cost reduction in the context of German electricity networks. When subject to a lower-powered regulation mechanism, relatively more efficient operators pile up more costs in the year used to determine future prices. This pattern is consistent with the idea that incentives matter: higher-powered incentives lead to cost reduction. The results are also consistent with an equilibrium where more efficient firms pool with less efficient ones under the threat of ratcheting.     

A retrospective study on the regional benefits and spillover effects of high-speed broadband networks: Evidence from German counties

This study aims to assess the economic benefits of high-speed broadband within and across neighboring counties in Germany. Utilizing a balanced panel dataset of 401 German counties with data from 2010 to 2015 as well as different panel estimation techniques, we find that an increase in average broadband speed has a significantly positive effect on regional GDP in the average German county. Furthermore, we find that broadband deployment in German counties induces not only substantial economic benefits in terms of direct effects within counties but also positive regional externalities across counties. According to our estimation results, an increase in average bandwidth speed by one unit (1 Mbit/s) induces a rise in regional GDP of 0.18%. This effect is almost doubled if we also take regional externalities into account (0.31%). Moreover, we find that regional agglomeraton effects are of particular relevance for rural counties. Our cost-benefit analysis of subsidies based on conservative estimates suggests efficiency gains, as the total economic per capita benefits (€164) of subsidy programs to encourage broadband expansion exceeded their associated per capita costs (€114).     

Price elasticity of demand for broadband: Evidence from Latin America and the Caribbean

In this study the authors analyze fixed broadband retail prices in Latin America and the Caribbean (LAC), and provide estimates about the effect of price changes on broadband adoption. The analysis is based on a survey of plans and tariffs conducted by the authors during Q2 2010. Their results suggest that fixed broadband services in LAC are generally expensive and of poor quality when benchmarked against Organisation for Economic Co-operation and Development (OECD) countries, although there is significant variance between markets in the region. In order to isolate the effect of prices on broadband adoption they use an instrumental-variable approach. Their findings show that broadband demand is relatively elastic to price in LAC but not in the OECD. They estimate that an average price reduction of 10% would result in an increase of almost 22% in the penetration rate in LAC, equivalent to almost 8.5 million additional broadband connections. Several policy implications result from these findings. First, national broadband policies in LAC should pay a closer attention to a deficit of competition in fixed broadband services, as households and firms face high prices for poor quality services, thus deterring adoption. Second, while their findings generally suggest that price reductions could significantly increase penetration, they elasticity estimates reveal that price effects might not be sufficient to achieve the penetration goals set in national broadband plans. This validates the need for complementary policy strategies that affect other determinants of broadband demand. The example of Brazil is used to illustrate this finding.     

Strategic choice and broadband divergence in the transition to next generation networks: Evidence from Canada and the U.S.

This article investigates how infrastructure competition among broadband network infrastructure operators in Canada and the U.S. has influenced their incentives to increase fixed broadband connection speeds and invest in next generation fiber-to-the-premises (FTTP) technologies. The evolution of measured broadband speeds since the late 2000s documents growing differences in the incentives of dominant broadband operators to respond to demand for higher speed connectivity by increasing connectivity speeds they deliver to their customers. Dominant network operators in Canada have shown relatively stronger incentives than their counterparts in the U.S. to invest in and increase the capacity of legacy platforms. In the U.S. FTTP deployment incentives have been somewhat stronger, but network operators have been more reluctant to upgrade legacy technologies to deliver higher speeds. Diversity of strategic choices by large operators helps explain increasing regional and local broadband infrastructure gaps within the two countries. A high dividend payout financial strategy and increasing vertical integration appear to enhance the potential for overinvestment and inefficient duplication in legacy platforms by competing infrastructure providers.     

Ultra-fast broadband access and productivity: Evidence from Italian firms

We study the impact of ultra-fast broadband (UFB) infrastructures on the total factor productivity (TFP) and labor productivity of firms. We use unique balanced panel data for the 2013–2019 period on incorporated firms in Italy. Using the geographical location of the firms, we merge firm-level data with municipality-level information on the diffusion of UFB, which started in 2015. We derive consistent firm-level TFP estimates by adopting a version of the Ackerberg et al.’s (2015) method, which also accounts for firm fixed effects. We then assess the impact of UFB on productivity and deal with the endogeneity of UFB by exploiting the physical distance between each municipality and the closest optical packet backbone node. Our results show an overall positive impact of UFB on productivity. Services companies benefit the most from advanced broadband technologies, as do firms located in the North-West and South of Italy. We further decompose the impact of full-fiber networks from mixed copper-fiber connections and find that the former significantly contribute to enhancing firm productivity. Finally, by exploiting Labor Force Survey data, we provide suggestive evidence that productivity increases from UFB might be related to structural changes at the workforce level.     

Multilevel governance and broadband infrastructure development: Evidence from Canada

This paper investigates the contributions of digital infrastructure policies of provincial governments in Canada to the development of broadband networks. Using measurements of broadband network speeds between 2007 and 2011, the paper analyzes potential causes for observed differences in network performance growth across the provinces, including geography, Internet use intensity, platform competition, and provincial broadband policies. The analysis suggests provincial policies that employed public sector procurement power to open access to essential facilities and channeled public investments in Internet backbone infrastructure were associated with the emergence of relatively high quality broadband networks. However, a weak essential facilities regime and regulatory barriers to entry at the national level limit the scope for decentralized policy solutions.     

Tenurial security and agricultural investment: Evidence from Vietnam

In Vietnam, all lands belong to the state, which assigns usufruct rights to those lands to individuals and households. In 1993, the state gave 20-year usufruct rights to growers of annual crops, and 50-year usufruct rights to growers of perennial crops. In 2013, as the usufruct rights of growers of annual crops were about to expire, the Vietnamese government passed a law—the Land Law of 2013—that extended the usufruct rights of all landowners by 50 years. We exploit this largely unanticipated shock to study the effect of tenurial security on agricultural investment. Using a difference-in-differences design, we find that the Land Law of 2013 is associated with a higher likelihood of investment by growers of annual crops in irrigation technology or soil and water conservation, but not other types of investment. Our results are robust to controlling for endogenous switching from annual to perennial crops, and our data support the parallel trends assumption.     

Learning processes in municipal broadband projects: An absorptive capacity perspective

Effective knowledge management is important to the success of information technology projects. This research applies the integrated lens of the absorptive capacity theory and the social process model of information system development projects to examine the dynamic of knowledge activities concerning broadband infrastructure development in the context of municipal broadband networks. The research questions are: (1) What is the extent of the dynamic of knowledge activities involved in the development process?, (2) What are the events that trigger knowledge activities in municipal broadband development?, and (3) How does a city create and utilize new knowledge in the development process? This study examines municipal wireless projects in three cities (Chaska, MN; Hermosa Beach, CA; and Fredericton, Canada). Events that trigger knowledge activities are assignment of personnel, physical system construction, performance problems, resistance, and reassignment of organizational roles. Four factors that influence knowledge activities and project performance are the dynamic of technology development, partnership commitments, limitation of external knowledge and learning-by-doing, and political dynamics. The study has policy implications for cities that are in the process of planning and deployment. A good project planning, user expectation management, systematic performance evaluation, a careful partner selection process, and the use of service level agreements are important to project success. In addition, cities need to take into consideration that the technology is not a plug and play technology and that considerable efforts are needed to integrate the technology with other solutions to deliver broadband services as well as to configure the system according to topologies, street conditions, buildings, density of trees, among others.     

Public private partnerships as a tool for stimulating investments in broadband

The paper is concerned with PPP in the telecommunications area and more specifically with the combination of public and private investments in upgrading broadband infrastructures. Following the liberalization of the telecommunications area, investments were primarily left to the private sector – though public investments have continued to take place in specific areas such as research and education networks and rural and otherwise underserved areas. Lately, however, governments have upgraded their public investment plans in broadband infrastructures. The question is whether we are witnessing a simple quantitative change or whether this quantitative change includes a qualitative evolvement in the view on the role of the public sector in expanding broadband infrastructures. At the present time, the most likely answer is that increasing public investments in broadband infrastructures signal a combination of concerns raised by the economic crisis and the growing awareness of the social and economic importance of efficient broadband infrastructures.     

The European Electronic Communications Code: A critical appraisal with a focus on incentivizing investment in next generation broadband networks

In September 2016, the European Commission (EC) published its proposal for a directive establishing the European Electronic Communications Code (EECC) – with one key aim being the provision of sufficient incentives for infrastructure investments into high-speed communication networks. Based on a detailed review of the theoretical and empirical literature of the most relevant regulatory measures – that is, co-investment models as well as different types of access regulation – we provide a critical appraisal of the respective provisions in the EECC. We find that, although the EECC can generally be seen as a step into the right direction, the expected effects on investment incentives as well as substantial implementation challenges in combination with a high degree of complexity of the envisaged measures contain substantial potential for improvement.     

Determinants of mobile broadband use in developing economies: Evidence from Sub-Saharan Africa

Broadband is seen as a vector of economic growth and social development. In the developing world, mobile technologies are widely adopted and mobile broadband is progressively rolled-out with high expectations on its impact on the countries’ development. We highlight what the determinants of mobile broadband use are in four Sub-Saharan countries. Using micro-level data coming from household surveys over 5 years, from 2013 to 2017, we show that SIM card ownership and being part of an online social community has a strong positive impact on mobile broadband use. We also highlight a positive correlation between digital inclusion and financial inclusion as mobile money users and bank account users are found to be more inclined to use mobile broadband. However, beyond apparent similarities, mobile broadband is used in different ways according to countries specificities. For instance, among the non-mobile owners in Nigeria, the unemployed are the most likely to use mobile broadband, most probably for job search practices, while it is rather used by students for information gathering in other countries. Finally we show that those excluded from mobile broadband use are the eldest, those with the lowest level of education, and women.     

Ultra-broadband investment and economic resilience: Evidence from the Covid-19 pandemic

We study the role of ultra-broadband infrastructures in reducing the economic recession caused by the 2020 pandemic. We exploit the variation in GDP and employment that happened between 2019 and 2020 as a result of the Covid-19 pandemic outbreak, and we investigate whether UBB investments had an impact on economic resilience. We use micro-level data on UBB exposure in 2019 matched with municipality-level information on local GDP and employment levels based on tax declarations for the period 2019–2020. We address the endogeneity between UBB and local income by exploiting the distance from the closest backbone node of the upstream telecommunication network. We find that exposure to UBB mitigates the negative effect of the pandemic on local employment. One additional year of UBB exposure increases local employment by 1.3 percentage points. The effect is stronger in areas hit more severely by the pandemic, thus confirming the role of advanced broadband infrastructures on the economic resilience from negative shocks.     

How does broadband infrastructure promote entrepreneurship in China: Evidence from a quasi-natural experiment

Using the Broadband China strategy as a quasi-natural experiment, our study attempts to understand how broadband infrastructure (BI) impacts entrepreneurship in China. Employing a staggered difference-in-difference approach, we argue that BI significantly enhances entrepreneurship, and that this conclusion holds after considering the identification of assumptions and a range of other factors that may interfere with the estimation results. The mechanism exploration reveals that human capital agglomeration and financial development are the main pathways through which BI encourages entrepreneurial activities. Furthermore, the positive effects of BI are bigger in eastern cities, high market-oriented cities, and among cities with excellent traditional infrastructure. Our findings reveal the role of improving BI in facilitating the development of new ventures in China.     

The impact of interfirm relationships on investment: Evidence from the Polish dairy sector

Financial constraints and credit market imperfections are a major constraint on investment, growth and poverty reduction in transition and developing countries. This paper analyses the impact on investments of financial assistance programs as part of interfirm relationships. Our empirical evidence is based on a two-stage survey methodology. Qualitative evidence on dairy companies’ assistance programs was gathered in the first stage through in-depth interviews at the level of the dairy companies. Quantitative data on 290 milk producing rural households in Poland was collected through a random survey in the second stage. The empirical analysis shows that dairy companies have played an important role in financial assistance, in particular for dairy-specific investments. In addition, they had an important indirect impact on farm activities and investments through feed supply and loan guarantee programs.     

The external cost of prostitution: Evidence from shutting down red light districts in the Netherlands

This article examines the value of externalities created by the presence of sex workers in the city. Although a legal paid-sex industry might contribute to the economy, it may also generate negative externalities. To identify the net impact of overt prostitution, we estimate changes in housing prices following the sudden closure of the two red light districts (RLDs) in the Dutch City of Utrecht. Our results show that the capitalization effect of RLDs is spatially heterogeneous. While some areas are unaffected, others are up to 12% more expensive if far from operating brothels. Interestingly, though, evidence also shows that RLDs increase local employment in a variety of sectors. All the aversion to living near RLDs is instead explained by petty crimes.     

Take your partners: Public private interplay in Australian and New Zealand plans for next generation broadband

Within a few days of each other in early 2009, the national governments of Australia and New Zealand announced separate plans to invest heavily in advanced broadband networks. Taxpayers in each country will contribute at least half the estimated cost of fibre-to-the-premises networks reaching the overwhelming majority of households and businesses within 8–10 years. These complex and controversial forms of ‘public private interplay’ demonstrate three trends: a shift away from the liberalization and privatization policy consensus of the last two decades; shared convictions about the anticipated size of fast broadband’s economic and social benefits, and about the need for wholesale-only fixed line network operation to maximize those benefits; and the unlikely impact of the global financial and economic crisis in stimulating investment in particular infrastructures seen as critical to the national economies that emerge from it. This article discusses industry structures and regulation in Australia and New Zealand, their long history of public investment in telecommunications and the recent popularity of public private partnerships (PPPs) with Australian state governments. It outlines the ambitious broadband plans and surveys their prospects. Like so many other policy actions following the global economic crisis, these are distinctively national responses to internationally shared challenges.     

Auctions with resale when private values are uncertain: Evidence from the lab and field

Auction theory represents one of the richest areas of research in economics over the past three decades. Yet, whether, and to what extent, the introduction of secondary resale markets influences bidding behavior in sealed-bid first-price auctions remains under researched. This study begins by examining field data from a unique data set that includes nearly 3000 auctions (over 10,000 individual bids) for cutting rights of standing timber in British Columbia from 1996 to 2000. In comparing bidding patterns across agents who are likely to have resale opportunities with those who likely do not, we find evidence that is consistent with theory. Critical evaluation of the reduced-form bidding model, however, reveals that sharp tests of the theoretical predictions are not possible because several other differences may exist across these bidder types. We therefore use a laboratory experiment to examine if the resale opportunity by itself can have the predicted theoretical effect. We find that while it does have the predicted effect, a theoretical model based on risk-averse bidders explains the overall data patterns more accurately than a model based on risk-neutral bidders. Beyond testing theory, the paper highlights the inferential power of combining naturally occurring data with laboratory data.     

Effects of broadband availability on total factor productivity in service sector firms: Evidence from Ireland

While broadband is widely believed to augment productivity, there is little firm-level evidence of a generalised causal effect. In this paper we examine whether the introduction of digital subscriber line (DSL) broadband services increased firms' productivity in nine sub-sectors within the services and distribution sector in Ireland from 2006 to 2012. Firm-level panel data on firms' characteristics are linked to spatial information on the rollout of DSL. While we do not find significant productivity effects in the services sectors taken together, we do find positive and significant effects on firm's total factor productivity in Information & Communication and Administrative & Support Services.     

Institutional common ownership and firm value: Evidence from real estate investment trusts

This paper contributes to the ongoing debate about whether and how institutional common ownership (ICO) affects firm behavior. Using a sample of equity real estate investment trusts (REITs), which provide significant advantages for isolating a monitoring channel, we find a robust and positive relation between ICO and REIT firm value. The positive relation between ICO and firm value is driven mainly by motivated investors and becomes stronger when we construct our ICO measures using blockholdings. Our difference‐in‐differences analysis, using mergers between institutional investors, suggests a causal relation exists between ICO and firm value. After investigating various channels through which ICO could affect firm behavior, we conclude that asset allocation decisions and performance are the most plausible explanations. Our finding that the monitoring associated with ICO aids managers in their portfolio disposition strategies further supports this conclusion. This enhanced monitoring leads to increased property portfolio returns, as well as more geographic diversification.