Sunday, 10 July 2011

Broadband helps arrest rural decline

Or so Homepaddock points out in a recent post. She writes,
Getting broadband into rural areas could help arrest the urban population drift, findings from a recent survey conducted by Professor Geoff Kearsley from Otago University’s Department of Media, Film and Communication, show.
Department of Media, Film and Communication? Why do I have a bad feeling about this? Anyway, my first question is, Why do we care if getting broadband into rural areas could help arrest the urban population drift? Such movements may not be a bad thing.

Homepaddock later says,
“The Internet has enhanced their social lives, created and enhanced business opportunities, replaced lost services and is helping rural people to stay where they would most like to live. One or two people have even been able to go and live in the country because of broadband facilities.

“When ultra-fast broadband becomes available to all rural households, then these benefits are likely to be greatly enhanced.”
We’ve got broadband which works at a similar speed as mobile using a T-stick. It’s considerably better than dial-up but a long way from ultra-fast. Improved speed and connectivity would make a big difference.
In terms of productivity at least fast broadband may not make as much difference as you think. If fact it may not may any difference at all. Recent work, see “The Need for Speed: Impacts of Internet Connectivity on Firm Productivity" by Arthur Grimes, Cleo Ren and Philip Stevens (Motu Working Paper 09-15 Motu Economic and Public Policy Research October 2009), argues that
Fast internet access is widely considered to be a productivity-enhancing factor. Internet access speeds vary regionally within countries and even within cities. Despite articulate pleas for network upgrades to accelerate internet access, there is little rigorous research quantifying benefits to individual firms that arise from upgraded internet connectivity. We use a large New Zealand micro-survey of firms linked to unit record firm financial data to determine the impact that differing types of internet access have on firm productivity. Propensity score matching is used to control for factors, including the firm’s (lagged) productivity, that determine firms’ internet access choices. Having matched firms, we examine the productivity impacts that arise when a firm adopts different types (speeds) of internet connectivity. Broadband adoption is found to boost productivity but we find no productivity differences across broadband type. The results provide the first firm-level estimates internationally of the degree of productivity gains sourced from upgraded internet access.
The paper's conclusion reads, in part,
After estimating our prediction models for connectivity choices, we match each “treated” firm with a set of like “control” firms (both in terms of their estimated propensity to have broadband and on their observable characteristics). Two types of matching (kernel and stratified) are adopted to check robustness of results. We then estimate the average treatment effect for treated firms (ATT) across a range of samples. We focus on ATTs relating to shifts from: (i) broadband versus no broadband, (ii) slow versus no broadband, and (iii) fast versus slow broadband. We find a (levels) productivity effect of broadband relative to no broadband of approximately 10% across all firms. The estimates indicate a marginally stronger impact on firm productivity for firms in rural (low population density) relative to urban (high density) areas but the differences are not significantly different. Our estimates show that all of these productivity gains can be attributed to adoption of slow relative to no broadband, with no discernable additional effect arising from a shift from slow to fast broadband. (Emphasis added)
Thus we can conclude that a shift to broadband connectivity (from dial-up) appears to raise firm's productivity but a move from slow to fast broadband may have no effect on productivity at all.

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