An Econometric Analysis of the Impact of Broadband Internet on Productivity

In this paper we look at whether increases in broadband internet penetration have a significant impact on productivity. We use data on a panel of 116 countries over the period 2009–2019 to estimate the impact of increases in fixed broadband penetration rates and high-speed broadband penetration rates on labour productivity, measured as output per person. We find a significant impact on productivity from increases in fixed broadband penetration rates. Our estimates indicate that broadband internet increased labour productivity growth by an average of 0.20 percentage points annually in developed countries and 0.26 percentage points in developing countries: this meant that broadband internet accounted for around 16 per cent of productivity growth in developed countries and 20 per cent of productivity growth in developing countries. For Canada we find that broadband internet contributed an average of 0.15 percentage points annually to Canada’s overall productivity growth of 0.91 per cent, about 17 per cent of total productivity growth. However, we did not find significant impacts for high-speed broadband over the period studies: it is possible that this is because applications that require higher speeds, such as videoconferencing, had not been widely deployed over our time period. This study emphasizes the crucial impact of broadband internet investment on boosting Canada's economywide productivity. This research indicates an important role for the government in facilitating the expansion of broadband access, optimizing regulatory frameworks, and stimulating private sector investment, especially in underserved regions, to enhance the social and economic benefits throughout Canada.