Presentación elaborada para el Banco Interamericano de Desarrollo (BID).

1. > BROADBAND AND DEVELOPMENT: EVIDENCE AND NEW
RESEARCH DIRECTIONS FROM LATIN AMERICA
HERNAN GALPERIN, PH.D.
Associate Professor, Universidad de San Andrés
Diálogo Regional sobre la Sociedad de la Información (DIRSI)
September 26, 2013
Inter-American Development Bank, Washington D.C., September 26, 2013

2. > TABLE OF CONTENTS
Project motivation and description: Why (and how to) study the
development impact of broadband?
Opening the black box: What we do – and don't – know about
the links between broadband and poverty alleviation.
The economic impact of broadband : Evidence from Colombia
and Ecuador.
>1
>2
>3

3. > PUBLIC INVESTMENT ON BROADBAND INITIATIVES IS ON THE RISE
IN LATAM, SOME ARE VERY SIGNIFICANT (UP TO 0.78% OF GDP)
0
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012
Countries with National Broadband Plan (2012) ARGENTINA BRAZIL COLOMBIA
NAME OF
INITIATIVE
Argentina
Conectada
Plano Nacional de
Banda Larga (PNBL)
Vive Digital
GEOGRAPHICAL
TARGET
100%
municipalities
76% municipalities 62% municipalities
PRICE/QUALITY
TARGET
10Mbps
1Mbps at US$ 20
per month
1Mbps
TOTAL
INVESTMENT
$1.8 billion USD $3.25 billion USD $2.25 billion USD
TOTAL PER
CAPITA
$44.2 USD $16.6 USD $48.6 USD
TOTAL AS % GDP 0.4% 0.13% 0.78%
DURATION 2011-2015 2010-2014 2010-2014
> Source: ITU/CISCO (2013)

4. > INVESTMENTS IN ICT FOR EDUCATION PROGRAMS ARE EQUALLY
SIGNIFICANT (UP TO 10% OF TOTAL EDUCATION EXPENDITURE)
> Source: UNESCO
ARGENTINA BRAZIL URUGUAY
NAME OF
INITIATIVE
Conectar Igualdad
Programa Banda
Larga nas Escolas
Plan Ceibal
TARGET Secondary
Primary and
secondary
Primary and
secondary
CONNECTIVITY No Yes Yes
EQUIPMENT Yes (laptop) No Yes (OLPC)
TOTAL ANNUAL
INVESTMENT
~700M USD n/a ~50M USD
TOTAL AS %
EDUCATION
EXPENDITURE
10% n/a 5%
YEAR STARTED 2010 2010 2008
0
5
10
15
20
25
30
35
40
45
50
Primary Secondary
Countries with ICT in Education programs

5. Does the evidence about positive impacts support these public
investments?
How are benefits being appropriated? How large are impact
externalities? What is the distributional impact?
How cost-effective are these programs? How to improve
program design and implementation?
>
>
>
> PROJECT MOTIVATION: RECENT PUBLIC INVESTMENTS IN
BROADBAND RAISE QUESTIONS ABOUT DEVELOPMENT IMPACT

6. > THE OPTIMISTIC PERSPECTIVE: BROADBAND AVAILABILITY AND
ADOPTION BOOST EMPLOYMENT AND ACCELERATE GDP GROWTH
AUTHOR(S) DATA METHODOLOGY RESULTS
QIANG AND ROSSOTTO (2009)
120 countries, 1980-2006.
OLS
10 p.p. increase in broadband yields an additional 1.38
p.p. of GDP growth.
KOUTROUMPIS (2009) 22 OECD countries, 2002–2007.
Simultaneous equations
model and instrumental
variables.
A 10% increase in broadband increases GDP growth by an
average of 0.25%
CZERNICH ET AL. (2011). 25 OECD countries, 1996-2007.
Instrumental variables.
A 10 p.p. increase in broadband raises annual per-capita
growth by 0.9-1.5 p.p.
LEHR ET AL. (2006).
ZIP codes and states (US),
1998–2002.
OLS
Broadband availability increases employment by 1.5% and
businesses by 0.5%. No effect on wages.
CRANDALL, R. ET AL. (2007).
States (USA), 2003-2005. OLS
A 10% increase in the penetration rate increases
employment by 2%. No effect on GDP growth.

7. > SOME CAVEATS ABOUT THE (OVERLY) OPTIMISTIC PERSPECTIVE
Causal attribution is problematic  reverse causality needs to
be addressed in study design.
Aggregated data at country or state level  small
samples, difficult to find appropriate controls.
Little conceptualization about the underlying mechanisms
through which broadband affects growth or employment.
>
>
>
Some recent studies are less optimistic (e.g., Mayo and
Wallsten, 2011; Forman et al., 2012).
>

8. > PROJECT OVERVIEW
Six quasi-experimental studies based on existing microdata.
> Counterfactuals in order to address reverse causality problem.
> Very large samples: ability to test for heterogeneous impacts, external
validity (unlike RCT).
Qualitative study in low-income communities in Mexico to validate
results and get in-depth perspective on impact mechanisms.
Extensive lit review about microfoundations of the link between
broadband and development
> Focus on poverty alleviation
>1
>2
>3

9. > THREE CASE STUDIES LOOKING AT BROADBAND IMPACT ON
GROWTH AND EMPLOYMENT
CASE STUDY COUNTRY DATA SOURCES METHODOLOGY
INTERNET AND ECONOMIC ACTIVITY IN
COLOMBIA : AN ANALYSIS AT THE
LEVEL OF MUNICIPALITIES AND 23
MAJOR CITIES.
Colombia
Panel of municipalities (2005-
2011).
Number of observations: 5,000
municipalities.
Annual household survey
from DANE and deployment
information from by
Ministry of ICT.
Panel data with random
effects and instrumental
variable.
IMPACT OF BROADBAND DEPLOYMENT
IN ECUADOR.
Ecuador
Panel of individuals in urban
areas 2009-2011.
Number of observations:
24,000 individuals.
National Household Survey
and deployment data from
Ministry.
Difference-in-difference.
THE WELFARE IMPACT OF BROADBAND
IN MEXICO.
Mexico
Number of observations:
7,000.
National household survey
from INEGI.
Structural equation models.

10. > THREE CASE STUDIES LOOKING AT BROADBAND IMPACT ON
SCHOOL PERFORMANCE
CASE STUDY COUNTRY DATA SOURCES METHODOLOGY
CONNECTED TO LEARN?
THE EFFECT OF BROADBAND
INTERNET ON SCHOOL QUALITY IN
BRAZIL.
Brazil
Panel data of students and
teachers 2007-2011.
Number of observations:
between 83,000 and 124,000.
School census and test
scores (Prova Brasil) from
Ministry of Education.
Administrative data for
PBLE from ANATEL.
Regression models that
exploit the phase-in of the
program.
CAN INFORMATION AND
COMMUNICATION TECHNOLOGIES (ICTS)
HAVE A POSITIVE IMPACT ON STUDENT
PERFORMANCE? EVIDENCE FROM
CHILE.
Chile
Two cohorts of primary-level
students in public schools
(2005-2011).
Number of observations:
between 110,000 and 133,000.
Test scores (SIMCE) and
information about ENLACES
program from Ministry of
Education.
Difference-in-difference with
matching.
INTERNET ACCESS, TYPE OF ACCESS
AND EDUCATIONAL OUTCOMES:
EVIDENCE FOR THE PERUVIAN CASE.
Peru
Panel data of students at
school level (2007-2011).
Number of observations:
10,000.
School Census and test
scores data from Ministry
of Education.
Difference-in-difference with
matching.

11. > OPENING THE BROADBAND BLACK BOX: (1) THE GROWTH
EFFECT
HYPOTHESIS 1: broadband adoption has a positive growth effect.
> Critical for poverty reduction: growth explains 75% of poverty reduction
in LATAM between 1990 and 2010 (Cruces et al., 2013)
Lit review suggests that:
> Broadband raises firm productivity, but only under certain conditions
(e.g., Colombo et al., 2012)  classic pattern of GPT.
> Broadband improves resource allocation by lowering transaction costs
and improving coordination (e.g., Goyal, 2010).
> Broadband improves labor matching (e.g., Kuhn and Mansour, 2011).
>
>

12. > THE GROWTH EFFECT: STYLIZED FACTS
INCREASE IN
PRODUCTIVITY
BETTER MARKET
COORDINATION
BETTER LABOR
MATCHING
Growth effectFIRM ADOPTION OF
BROADBAND
HH ADOPTION OF
BROADBAND
>
>
>
>
>
>

13. >
>
> OPENING THE BROADBAND BLACK BOX: (2) THE EMPLOYMENT
EFFECT
Lit review suggests that:
> Broadband reduces friction in labor markets (e.g., Autor, 2001).
> Broadband promotes acquisition of ICT skills with labor market payoffs (e.g.,
Blanco and Lopez Boo, 2010).
> Broadband promotes weak social ties (Granovetter, 2005).
HYPOTHESIS 2: broadband adoption has a positive employment/wage
effect.
> Improvements in employment are critical factor for sustained poverty alleviation.
> But ICT effects on employment are not clear  skill bias (Autor, Katz and
Krueger, 1998) and “hollowing out” hypotheses.

14. INCREASE SOCIAL
CAPITAL
BETTER LABOR
MATCHING>
>
>FIRM ADOPTION OF
BROADBAND
> THE GROWTH + EMPLYMENT EFFECTS: STYLIZED FACTS
+
INCREASE IN
PRODUCTIVITY
BETTER MARKET
COORDINATION Growth effect
HH ADOPTION OF
BROADBAND
BROADBAND IN
SCHOOLS
>
>
>
ICT SKILLS
ACQUISITION
Employment effect>>
>
>

15. >
>
> OPENING THE BROADBAND BLACK BOX: (3) THE GOVERNANCE
EFFECT
HYPOTHESIS 3: broadband adoption has a positive governance effect.
Poverty and poor governance are mutually reinforcing:
> Poverty prevents human capital accumulation and increases political instability
(Easterly, 2006)
> Poor institutions breed poverty (Robinson and Acemoglu, 2011)
>
Lit review suggests that:
> Broadband adoption promotes accountability (e.g., Gonçalves, 2009; Bjorkman
and Svensson, 2007).
> Broadband access promotes civic engagement (Stern et al., 2011).

16. > THE GROWTH + EMPLOYMENT + GOVERNANCE EFFECTS:
STYLIZED FACTS
BETTER MARKET
COORDINATION
BETTER LABOR
MATCHING
INCREASE SOCIAL
CAPITAL
Growth effect
HH ADOPTION OF
BROADBAND
BROADBAND IN
SCHOOLS
FIRM ADOPTION OF
BROADBAND
ICT SKILLS
ACQUISITION
INFORMATION GAINS
Employment effect
INCREASE IN
PRODUCTIVITY
Governance effect
>
>
>
>
>
+
+
>
>
>
>
>
>
>
>
>
>

17. 0
50
100
150
200
250
300
350
400
450
2006-1
2006-2
2007-1
2007-2
2008-1
2008-2
2009-1
2009-2
2010-1
2010-2
2011-1
2011-2
2012-1Tr
0
500
1000
1500
2000
2500
3000
3500
2006-4 2007-2 2007-4 2008-2 2008-4 2009-2 2009-4 2010-2 2010-4 2011-2 2011-4
Total Internet ≥ 256 ≥ 512 ≥ 1024
> COLOMBIA CASE: BASIC FACTS
Colombia: Internet and broadband subscribers (in 000s), 2006-11 Colombia: Corporate broadband subscribers (in 000s), 2006-12

18. > COLOMBIA: DATA, METHOD AND KEY QUESTIONS
> . Panel of municipalities between 2005-2011 (~ 5,000 obs.)
. Sources: HH survey (GEIH), MinTIC, and DNP.
. OLS regressions, IV =average slope of terrain.
. Proxies for economic activity: tax revenues and # firms.
. Basic model:
. Key questions:
> Does faster broadband adoption yield more economic activity
(growth effect)?
> Is the effect different for HH vs. corporate adoption?
> Does access speed matter (256 vs. 512 vs. 1024kbps)?

19. > COLOMBIA: KEY FINDINGS
> . Broadband has a positive impact on economic activity
> A 10% increase in penetration yields 0,4% in tax revenues
> A 10% increase in penetration yields 4% in # firms
. The magnitude of effects is similar for HH and corporate adoption
> HH adoption also has effect on # firms
. The magnitude of effects is similar for different speed levels
> What really matters is connectivity, not speed

20. > ECUADOR: BASIC FACTS
> . Until 2009 broadband supply outside main cities was very limited
. Between 2010 and 2011 CNT invested heavily in extending
coverage to urban (and some rural) areas
. Opportunity to compare changes in employment and income in:
> Treatment group: cantones connected in 2010-11 (27 cantones
with pop. 2.3M)
> Control group: cantones already connected in 2009 (10 cantones
with pop. 6.1M)

21. > ECUADOR: DATA, METHOD AND KEY QUESTIONS
> . Panel of individuals between 2009-2011 reporting labor income and
ICT module:
> Treatment group: 8,785 individuals
> Control group: 7,664 individuals
. Sources: National HH survey and SENATEL.
. T-test reveals groups have similar mean in variables of interest
at baseline (2009)
. Basic model:
. Key questions:
> Has income raise more in municipalities connected in 2010-2011?
> Are there differences between adopters and non adopters?
> Are there heterogeneous effects (by age/gender/occupations)?

22. > ECUADOR: KEY FINDINGS
> . Broadband has a positive impact on labor income (regardless
of adoption)
> Increase in individual labor income of $25,7 USD over 2-year period
> 7.5% increase over initial sample average (3.6% per year)
. The effect is larger for those adopting broadband
> Increase in individual labor income of $51,8 USD over 2-year period
> 10,3% increase over initial sample average (5% per year)
. The overall effect is larger for men than for women
> Yet gender difference disappears among broadband adopters

23. More information:
www.dirsi.net
hgalperin@udesa.edu.ar