Regional Inequalities in the Impact of Broadband on Productivity. Evidence from Brazil

Abstract

The aim of this paper is to perform an analysis of the impact of broadband on regional productivity in Brazil, intending to find out if the economic impact is uniform across all territories of the country. The possibility of performing a regional approach, instead of the usual country-level analysis, means an opportunity to disentangle the economic impact of broadband at territories which share a common institutional and regulatory framework as are the regions inside a same country. Results suggest that the impact of broadband on productivity is not uniform across regions, and seemsto be yielding higher productivity gains for less developed regions, a result which is robust after controlling for differences in connection quality, network effects, human capital and sectorial composition. Results further verify that broadband connectivity yields higher economic impact in regions specialized in specific sectors as commerce and information services. Another important result verified in this paper is that faster download speed and critical-mass accounting for network externalities enhance the economic impact of broadband. The fact that most underdeveloped regions in Brazil seem to be benefiting more from broadband may suggest that broadband can constitute a factor favoring regional convergence in Brazil, although further research will be needed to confirm that assertion.