Impact of Superfast: Broadband on Local Economic Growth. Empirical Evidence using a Matching Estimator by Maude Hasbi

1. Impact of Superfast Broadband on Local
Economic Growth
Empirical Evidence Using a Matching Estimator
Maude Hasbi
FSR C&M Scientific Seminar
March 24th, 2017
Hasbi Impact of Superfast Broadband on Local Economic Growth

2. Motivation
Superfast broadband is seen as a key enabler for
socio-economic development.
Many countries have adopted a national broadband plan to
ensure the whole coverage of their territory.
The US, Australia, Japan, France...
We observe a rapid penetration of superfast broadband in
urban area.
Hasbi Impact of Superfast Broadband on Local Economic Growth

3. Impact of superfast broadband on local economic growth
Using data on more than 36,000 municipalities over 5 years
(2010-2014), I estimate whether superfast broadband
networks have an impact on local economic growth:
Number of companies
Number of new companiess
3 main types of non-farm market sectors
Individually owned companies
I use nearest neighbor matching estimator
First step: panel data analyses with fixed effects
Robustness checks: difference-in-differences methods
Hasbi Impact of Superfast Broadband on Local Economic Growth

4. Literature review
Large number of macro-level studies bring empirical evidence
on the positive impact of broadband adoption on economic
growth.
Gruber et al. 2014: Economic benefits are only marginally
appropriable by firms, they mostly spill over to users.
Limited empirical evidence of the effect of broadband on
economic growth at the local level:
Mostly studies concentrate on the impact of broadband on
employment (Czernich (2014), Whitacre et al. (2014))
As far as firms are concerned, literature focuses on broadband
impacts on productivity and firm performance (Akerman et al.
(2015), Bertschek et al. (2013))
McCoy et al. (2016) highlights the existence of a positive
impact on new business establishment.
Studies focus on the impact of old generation broadband
technologies and are realized at a more aggregated local level.
Hasbi Impact of Superfast Broadband on Local Economic Growth

5. Propensity score matching techniques
Propensity score matching are non-parametric estimators used
to estimate average treatment effect.
Yit+1(1), (Yit+1(0)) denotes an outcome which is realized in
time t + 1 if municipality i receives (doesn’t receive) at time t
a treatment dit = 1 (dit = 0)
ATT = E(Yit+1(1) | dit = 1) − E(Yit+1(0) | dit = 1) (1)
First term: expected value of Y, in time t + 1, in municipalities
in which a treatment has been received in time t, which is
observable;
Second term: Expected value of the Y, in time t + 1, for the
control group, had a treatment been received in time t, which
is NOT observable.
Hasbi Impact of Superfast Broadband on Local Economic Growth

6. Propensity score matching techniques: Assumptions
Treatment distribution may suffer from a selection bias.
Matching estimators seek to reproduce the treatment group
among the non-treated group using observable characteristics.
The key component in the modeling is to determine the
relevant set of matches.
Yit+1(1), Yit+1(0) ⊥ dit | X (2)
Propensity score techniques represents the conditional
probability of receiving a treatment given pretreatment
characteristics.
Based on an overlap assumption.
0 < Pr(dit = 1 | Xit) < 1 (3)
Hasbi Impact of Superfast Broadband on Local Economic Growth

7. Propensity score matching techniques: Application
I assess whether superfast broadband networks have a causal
effect on the number of companies operating locally and the
creation of new businesses.
Paris, Lyon and Marseilles are excluded.
Keep municipalities with at least 2,000 inhabitants to define
relevant control groups
Unlikely to have a superfast broadband by private operators in
smaller municipalities
Treatment: superfastbbit = 1 if a superfast broadband
network has been deployed.
To control for potential issues of reverse causality, I use lag
variables.
Hasbi Impact of Superfast Broadband on Local Economic Growth

8. Relevant set of matches: panel data with fixed effects
company ind construc comm adm new company new ind new construc new comm adm
superfast bb 0.0325*** 0.0136** 0.0476*** 0.0271*** 0.0252*** -0.0059 0.0117 0.0256**
(0.006) (0.006) (0.006) (0.006) (0.009) (0.018) (0.019) (0.010)
income 0.0029** 0.0005 -0.0018 0.0038*** 0.0052*** 0.0059 0.0169*** 0.0035*
(0.001) (0.001) (0.001) (0.001) (0.002) (0.004) (0.004) (0.002)
estab commserv % 0.0002 -0.0015*** -0.0016*** 0.0008*** 0.0001 0.0033*** 0.0062*** -0.0022***
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
unemployment -0.0017 0.0017 0.0018 -0.0028** -0.0025 -0.0036 0.0041 -0.0039*
(0.001) (0.001) (0.001) (0.001) (0.002) (0.004) (0.004) (0.002)
density 0.1876*** 0.1747*** 0.3656*** 0.1563*** 0.1770*** 0.3365** 0.3212** 0.1438*
(0.048) (0.047) (0.044) (0.046) (0.067) (0.142) (0.147) (0.077)
households 0.2966*** 0.3848*** 0.1701*** 0.3396*** 0.2030*** 0.2041* -0.0899 0.2491***
(0.036) (0.036) (0.033) (0.035) (0.051) (0.108) (0.111) (0.059)
y2011 0.0205*** 0.0150*** 0.0154*** 0.0226*** 0.0036 0.0268*** 0.0197** 0.0019
(0.003) (0.003) (0.003) (0.003) (0.005) (0.010) (0.010) (0.005)
y2012 0.0392*** 0.0088** 0.0353*** 0.0438*** -0.0280*** 0.0149 -0.0512*** -0.0258***
(0.004) (0.004) (0.003) (0.004) (0.005) (0.011) (0.012) (0.006)
y2013 0.0846*** 0.0340*** 0.0830*** 0.0921*** -0.0216*** 0.0451*** -0.0944*** -0.0111
(0.005) (0.005) (0.004) (0.005) (0.007) (0.014) (0.015) (0.008)
y2014 0.1406*** 0.0776*** 0.1395*** 0.1551*** -0.1013*** -0.0361** -0.2184*** -0.0872***
(0.006) (0.006) (0.005) (0.005) (0.008) (0.017) (0.018) (0.009)
Constant 5.0320*** 2.5535*** 3.2800*** 4.6915*** 3.1519*** -0.0700 0.5269*** 3.1163***
(0.055) (0.054) (0.050) (0.052) (0.077) (0.163) (0.168) (0.089)
Observations 24,663 24,663 24,663 24,663 24,663 24,663 24,663 24,663
R-squared 0.156 0.102 0.207 0.187 0.025 0.012 0.059 0.012
Nb municipalities 4,933 4,933 4,933 4,933 4,933 4,933 4,933 4,933
Standard errors in parentheses: *** p < 0.01, ** p < 0.05, * p < 0.1
Hasbi Impact of Superfast Broadband on Local Economic Growth

9. Relevant set of matches
establishmentit+1 : (establishmentit−1), (perc estab commservit),
log householdsit−2, densityit−2 unemplit−2, incomeit−3, year
(perc uni diplomait−2), (socio professional groupsit−2).
(4)
new establishmentit+1 : (establishmentit−1), (perc estab commservit),
log householdsit−2, densityit−2 unemplit−2, incomeit−3, year
(perc uni diplomait−2), (socio professional groupsit−2).
(5)
company ind construc comm adm new company new ind new construc new comm adm
superfast bb 0.0389** 0.0417** 0.0156 0.0376** 0.0489** 0.0738** 0.0270 0.0473**
(0.018) (0.021) (0.022) (0.018) (0.020) (0.035) (0.028) (0.019)
Observations 24,663 24,663 24,663 24,663 24,663 24,663 24,663 24,663
Standard errors in parentheses: *** p < 0.01, ** p < 0.05, * p < 0.1
Hasbi Impact of Superfast Broadband on Local Economic Growth

10. Robustness checks
Comparison with first stage: panel data analyses with fixed
effects
Use difference-in-difference methods (double difference
between two groups and two time periods)
Deployments happen within 5 years, but very few deployment
before 2013
Try different specifications (several diff-in-diff)
Only significant when time is set in 2012 and 2013 for all
deployments
Similar results for both specifications
Hasbi Impact of Superfast Broadband on Local Economic Growth

11. Impact of superfast broadband
Table: Sum up of effects
ATT diff 2012 diff 2013 Panal FE
company 3.9% 4.4% 4% 3.3%
industry 4.2% 2.6% 2.1% 1.4%
construction X 6.8% 6.9% 5.8%
comm adm 3.8% 3.7% 3.1% 2.7%
new company 4.% 4.3% 4.3% 2.5%
n industry 7.4% 2.9% X X
n construction X 4.8% 5.1% X
n commadm 4.7% 4% 3.8% 2.6%
n individual comp 3.4% 3.2% 3.2% 2%
n estab comm serv 4.2% 4.1% 4.4% 6%
n estab serv hh X X X X
n estab serv comp 5.9% X X X
X: insignificant
Hasbi Impact of Superfast Broadband on Local Economic Growth

12. Impact of superfast broadband
Positive average effect of superfast broadband on the number
of establishments locally (average +4%)
Especially in the construction (average +6%) and tertiary
sectors (average +3%)
Positive average effect of superfast broadband on
establishments creation (average +3%)
Positive average effect on the number of establishment
creation in the construction sector (average +5%)
Mixed average effect on the number of establishment creation
in the industrial sector (average +3% / +7 %)
Positive average effect on the number of establishment
creation in the tertiary sector (average +3%)
Hasbi Impact of Superfast Broadband on Local Economic Growth

13. Impact of superfast broadband
Possible to disaggregate further the tertiary sector for new
establishments:
Higher positive impact for new establishments operating in the
commerce and service sector (average +4% +6%)
Not significant for new establishments dedicated to households
services
As regards establishments dedicated to company services, only
significant for ATT (average +6%)
Positive impact of the creation of individually owned
businesses (average +4%)
Hasbi Impact of Superfast Broadband on Local Economic Growth

14. Thanks a lot
Any questions?
FSR C&M Scientific Seminar
March 24th, 2017
Hasbi Thanks a lot