Broadband Infrastructure and Economic Growth in Rural Areas

• Broadband positively affects the retail sector in rural areas • No effect of broadband on manufacturing; mixed effect on agriculture • The biggest effect of broadband is for connection speeds below 10 Mbps • Domestic sellers use social media for marketing purposes which translates into higher sales Using unique data from a systematic roll-out of broadband infrastructure in rural areas, we provide evidence on the impact of high-speed internet via broadband on three main sectors of economy: retail, agriculture, and manufacturing. Our instrumental variable model, which relies upon the timing of the roll-out at the first stage, shows that in general broadband access does not foster economic growth, but positively affects the retail sector, with no effect on the manufacturing and agricultural sectors. We also find that the biggest effects are found for speeds below 10 Mbps. We supplement our findings by exploring potential mechanisms that could drive the results.