Broadband and Productivity: Structural Estimates for Germany

Abstract

We employ a control function methodology, complemented by various identification strategies, to causally estimate the heterogeneous effects of broadband availability on firms’ total factor productivity (TFP) across 46 two-digit manufacturing and service industries in Germany from 2010 to 2015. Throughout this period, the availability of broadband, defined as access to transmission rates of at least 16 Mbps, more than doubled across German municipalities. Our findings reveal that, while broadband availability had a negligible effect on the productivity of manufacturing firms, it exerted a significant and highly heterogeneous impact in numerous service sectors, with an estimated average increase of up to 6.8% in information and communication services.