Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access
54 Pages Posted: 11 Oct 2016 Last revised: 24 Mar 2021
Date Written: March 22, 2021
Government infrastructure investment may crowd out investment from private firms, or may induce them to invest preemptively or competitively. The tension between these effects underlies the policy debate over municipal provision of internet access. I estimate demand for internet technologies using nationwide U.S. data, and combine these results with a dynamic oligopoly model of private and public firms' entry and investment decisions. I then simulate actions under a ban on public provision and find that municipalities induce more private investment in fiber-optic internet through preemption and competition than they crowd out, and that such a ban decreases welfare by $86 billion over 20 years.
Keywords: Broadband, Demand, Dynamic, Public, Crowding Out, Preemption
JEL Classification: L13, L21, L33, L96, H32, H44
Suggested Citation: Suggested Citation