The Skill Complementarity of Broadband Internet

By Anders Åkerman, Ingvil Gaarder, Magne Mogstad. Social Science Research Network, 2015

662 citations recorded by the source corpus.

Does adoption of broadband internet in firms enhance labor productivity and increase wages? And is this technological change skill biased or factor neutral? We exploit rich Norwegian data with firm-level information on value added, factor inputs and broadband adoption to answer these questions. We estimate production functions where firms can change their technology by adopting broadband internet. A public program with limited funding rolled out broadband access points, and provides plausibly exogenous variation of broadband adoption in firms. This enables us to address endogeneity of broadband adoption and examine how it shifts the production technology and changes the productivity and labor outcomes of different types of workers. We find that broadband adoption favors skilled labor by increasing its relative productivity. The increase in productivity of skilled labor is especially large for college graduates in fields such as science, technology, engineering and business. By comparison, broadband internet is a substitute for workers without high school diploma, lowering their marginal productivity. Consistent with the estimated changes in labor productivity, wage regressions show the expansion of broadband internet improves (worsens) the labor outcomes of skilled (unskilled) workers. We explore several possible explanations for the skill bias of broadband internet. We find suggestive evidence that broadband internet complements skilled workers in executing nonroutine abstract tasks, and substitutes for unskilled workers in performing routine tasks. When we use our production function estimates to construct measures of firm level productivity, we find that broadband internet accounts for a few percent of the standard deviation in total factor productivity across firms. Taken together, our findings have important implications for the ongoing policy debate over government investment in broadband infrastructure to encourage productivity and wage growth.

Subfields: Economics and Econometrics, Media Technology

View Paper: https://www.semanticscholar.org/paper/78094a1c16b262a5139f65d15979b0e72b22be09

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Citations in the corpus

The internet and Chinese exports in the pre-ali baba era (2017, positive): “in Arnold et al., 2016). Using cross-sections of firms across developing countries, Clarke et al. (2015) and Paunov and Rollo (2015) show that firm growth and productivity are much higher when internet access is greater and when firms use the internet more intensively.”
Robots at Work (2015, neutral): “10 For evidence on the labor market effects of ICT, see, for example, Autor, Katz, and Krueger (1998), Autor, Levy, and Murnane (2003), Acemoglu and Autor (2011), Michaels et al. (2014), Goos, Manning, and Salomons (2014), and Akerman, Gaarder, and Mogstad (2015).”
The Growing Importance of Social Skills in the Labor Market (2017, background): “In Garicano and Rossi-Hansberg (2004), Garicano and Rossi-Hansberg (2006) and Antras et al. (2006), managers have greater knowledge than workers, and production is organized so that highly skilled managers can optimally leverage their knowledge.”
The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry (2017, positive): “Similar to Akerman et al. (2013), we perform two checks that support the basis for our key identification assumption.”
Technology, Vintage-Specific Human Capital, and Labor Displacement: Evidence from Linking Patents with Occupations∗ (2022, background): “By contrast, Akerman, Gaarder, and Mogstad (2015) and Humlum (2019) provide in depth analyses of impacts of adoption of broadband internet and industrial robots on incumbent workers’ subsequent outcomes, respectively, leveraging employer-employee matched data from Scandinavia.”
German Robots - The Impact of Industrial Robots on Workers (2017, background): “A large strand of literature has studied the labor market effects of information and communication technology (Autor et al. 2003, Michaels et al. 2014, Akerman et al. 2015).”
Drivers of disruption? Estimating the Uber effect (2018, background): “A subset of this literature uses variation in broadband availability across locations, to examine the causal impact on the labor market outcomes for different types of workers (Akerman et al., 2015).”
The Arrival of Fast Internet and Employment in Africa (2019, background): “…poor countries, it is a priori unclear if fast Internet affects job inequality across the educational attainment range in Africa in the same way that “computerization” has been shown to do in rich countries (Katz & Autor, 1999; Bond & Van Reenen, 2007; Goldin & Katz, 2007; Akerman et al. , 2015).”
Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market (2019, positive): “The reason is that these studies do not address the concern that estimates of firm effects will be biased upward and estimates of worker sorting will be biased downward due to limited worker mobility across firms (Andrews et al., 2008). Following the approaches of Bonhomme et al. (2019, BLM hereafte”