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Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access

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  • Kyle Wilson

Abstract

Government infrastructure investment may crowd out investment from private firms or induce them to invest preemptively. The tension between these effects underlies the policy debate over municipal provision of internet access. I estimate demand for broadband and combine these results with a dynamic oligopoly model of private and public firms' entry and investment decisions. I simulate a ban on public entry and find that municipalities crowd out more private fiber-optic investment than they induce through preemption. I estimate that this ban decreases consumer surplus and municipal profits by $27 billion while increasing private profits by $23 billion over ten years.

Suggested Citation

  • Kyle Wilson, 2025. "Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access," American Economic Journal: Microeconomics, American Economic Association, vol. 17(4), pages 399-431, November.
    • Handle: RePEc:aea:aejmic:v:17:y:2025:i:4:p:399-431
    DOI: 10.1257/mic.20210110
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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