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Speed 2.0 - Evaluating Access to Universal Digital Highways

Author

Listed:
  • Gabriel Ahlfeldt
  • Pantelis Koutroumpis
  • Tommaso Valletti

Abstract

This paper shows that having access to a fast Internet connection is an important determinant of capitalization effects in property markets. Our empirical strategy combines a boundary discontinuity design with controls for time-invariant effects and arbitrary macro-economic shocks at a very local level to identify the causal effect of broadband speed on property prices from variation that is plausibly exogenous. Applying this strategy to a micro data set from England between 1995 and 2010 we find a significantly positive effect, but diminishing returns to speed. Our results imply that disconnecting an average property from a high-speed first-generation broadband connection (offering Internet speed up to 8 Mbit/s) would depreciate its value by 2.8%. In contrast, upgrading such a property to a faster connection (offering speeds up to 24 Mbit/s) would increase its value by no more than 1%. We decompose this effect by income and urbanization, finding considerable heterogeneity. These estimates are used to evaluate proposed plans to deliver fast broadband universally. We find that increasing speed and connecting unserved households passes a cost-benefit test in urban and some suburban areas, while the case for universal delivery in rural areas is not as strong.

Suggested Citation

  • Gabriel Ahlfeldt & Pantelis Koutroumpis & Tommaso Valletti, 2015. "Speed 2.0 - Evaluating Access to Universal Digital Highways," CESifo Working Paper Series 5186, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5186
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    References listed on IDEAS

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    Cited by:

    1. Constantin Mang, 2016. "Market Consequences of ICT Innovations," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 70, January.
    2. Briglauer, Wolfgang & Cambini, Carlo & Grajek, Michał, 2017. "Speeding Up the Internet: Regulation and Investment in European Fiber Optic Infrastructure," 28th European Regional ITS Conference, Passau 2017 169451, International Telecommunications Society (ITS).
    3. Benjamin Faber & Rosa Sanchis-Guarner & Felix Weinhardt, 2015. "ICT and Education: Evidence from Student Home Addresses," SERC Discussion Papers 0186, Spatial Economics Research Centre, LSE.
    4. Briglauer, Wolfgang & Dürr, Niklas S. & Falck, Oliver & Hüschelrath, Kai, 2016. "Does state aid for broadband deployment in rural areas close the digital and economic divide?," ZEW Discussion Papers 16-064, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Marc Bourreau & Lukasz Grzybowski & Maude Hasbi, 2018. "Unbundling the Incumbent and Entry into Fiber: Evidence from France," CESifo Working Paper Series 7006, CESifo Group Munich.
    6. repec:oup:cesifo:v:64:y:2018:i:2:p:216-240. is not listed on IDEAS
    7. repec:eee:iepoli:v:42:y:2018:i:c:p:1-10 is not listed on IDEAS
    8. Dorothee Bär & Peter Knauth & Wilhelm Eschweiler & Wolfgang Kopf & Valentina Daiber & Wilhelm Dresselhaus & Iris Henseler-Unger & Christian Wernick & Justus Haucap & Ulrich Heimeshoff & Mirjam Lange &, 2016. "Wie viel ist genug? Breitbandausbau in Deutschland," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(20), pages 03-28, October.
    9. Hasbi, Maude, 2017. "Impact of Very High-Speed Broadband on Local Economic Growth: Empirical Evidence," 14th ITS Asia-Pacific Regional Conference, Kyoto 2017: Mapping ICT into Transformation for the Next Information Society 168484, International Telecommunications Society (ITS).

    More about this item

    Keywords

    internet; property prices; capitalization; digital speed; universal access to broadband;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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