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Why Should Governments Support Broadband Adoption?

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  • Kolko, Jed

Abstract

Governments justify support of Internet diffusion on two grounds: (1) to overcome a persistent digital divide in broadband availability and (2) to facilitate online activities that are socially or economically desirable. This paper assesses both these claims. Using individual-level data from Forrester Research, the analysis finds significantly lower residential broadband adoption in lower-income and lower-density zip codes, controlling for individual characteristics. Further tests show that lower adoption in these areas is evidence of a persistent digital divide in availability. The analysis then assesses how broadband adoption changes individuals’ usage of online activities. Broadband adoption increases individuals’ frequency of researching health information online, but there is no evidence that broadband adoption increases usage of online job sites or online government services. Localities currently considering municipal wireless (Wi-Fi) initiatives should focus on digital divide justifications rather than expecting to raise usage of a wide range of online activities perceived to be socially desirable.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3363.

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Date of creation: Nov 2006
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Handle: RePEc:pra:mprapa:3363

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Keywords: broadband; Internet; digital divide; online; consumer behavior;

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  1. Tom Downes & Shane Greenstein, 2005. "Understanding Why Universal Service Obligations May Be Unnecessary: The Private Development of Local Internet Access Markets," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0516, Department of Economics, Tufts University.
  2. Downes, Tom & Greenstein, Shane, 2002. "Universal access and local internet markets in the US," Research Policy, Elsevier, Elsevier, vol. 31(7), pages 1035-1052, September.
  3. Clay, Karen, et al, 2002. "Retail Strategies on the Web: Price and Non-price Competition in the Online Book Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(3), pages 351-67, September.
  4. Austan Goolsbee, 1998. "In a World Without Borders: The Impact of Taxes on Internet Commerce," NBER Working Papers 6863, National Bureau of Economic Research, Inc.
  5. Fiona Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2003. "Consumer Information and Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?," Quantitative Marketing and Economics, Springer, Springer, vol. 1(1), pages 65-92, March.
  6. Kuhn, Peter & Skuterud, Mikal Skuterud, 2002. "Internet Job Search and Unemployment Durations," University of California at Santa Barbara, Economics Working Paper Series qt8583s24x, Department of Economics, UC Santa Barbara.
  7. Grubesic, Tony H., 2006. "A spatial taxonomy of broadband regions in the United States," Information Economics and Policy, Elsevier, Elsevier, vol. 18(4), pages 423-448, November.
  8. James E. Prieger, 2003. "The Supply Side of the Digital Divide: Is There Equal Availability in the Broadband Internet Access Market?," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 41(2), pages 346-363, April.
  9. Fiona Scott Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2001. "Internet Car Retailing," NBER Chapters, National Bureau of Economic Research, Inc, in: E-commerce, pages 501-519 National Bureau of Economic Research, Inc.
  10. Goolsbee, Austan & Klenow, Peter J, 2002. "Evidence on Learning and Network Externalities in the Diffusion of Home Computers," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 45(2), pages 317-43, October.
  11. Morton, Fiona Scott & Zettelmeyer, Florian & Silva-Risso, Jorge, 2001. "Internet Car Retailing," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 49(4), pages 501-19, December.
  12. Brown, Jeffrey, 2000. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp00-007, Harvard University, John F. Kennedy School of Government.
  13. Richard N. Clarke & Kevin A. Hassett & Zoya Ivanova & Laurence J. Kotlikoff, 2004. "Assessing the Economic Gains from Telecom Competition," NBER Working Papers 10482, National Bureau of Economic Research, Inc.
  14. Gillett, Sharon E. & Lehr, William H. & Osorio, Carlos, 0. "Local government broadband initiatives," Telecommunications Policy, Elsevier, Elsevier, vol. 28(7-8), pages 537-558, August.
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