Measuring the competitive impact of the internet: Evidence from a natural experiment in broadband access

Abstract

To identify the competitive effect of online competition, I exploit that consumers in some German municipalities lack broadband access due to legacy glass fibre cables. In these areas with reduced online competition, I find that offline employment in electronics retailing grows faster than in the control areas. I find no such differential for food retailing, where there is no online competition. Full broadband access reduces employment growth in electronics relative to food retailing by 1.1% per year from 1999 to 2007. I find no significant effect for book retailing, which is shielded from retail price competition by law.