Does State Aid for Broadband Deployment in Rural Areas Close the Digital and Economic Divide?

39 Pages Posted: 7 Oct 2016

See all articles by Wolfgang Briglauer

Wolfgang Briglauer

WU Vienna

Niklas Dürr

ZEW – Leibniz Centre for European Economic Research - Competition and Regulation Research Group

Oliver Falck

CESifo (Center for Economic Studies and Ifo Institute) - Department Human Capital and Innovation

Kai Hüschelrath

ZEW – Leibniz Centre for European Economic Research

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Date Written: October 6, 2016

Abstract

We evaluate the impact of a major European state aid program for broadband deployment applied to rural areas in the German State of Bavaria in the years 2010 and 2011. Using difference-in-differences estimation strategies, we find that aided municipalities have – depending on broadband quality – a between 16.8 and 23.2 percent higher broadband coverage than non-aided municipalities. This increase in broadband coverage – closing the digital divide – results in an increase of on average seven employed individuals living in the respective aid-receiving municipalities while leaving the number of employed or selfemployed individuals or wages unaffected. We therefore conclude that an increase in broadband coverage through state aid prevents rural areas from depopulation, but does not contribute to a further closing of the economic divide in the form of creating new jobs.

Keywords: Government policy; state aid; ex-post evaluation; broadband; employment, rural areas; European Union; Germany; Bavaria

JEL Classification: D62; D73; G38; H23; J23; K23; L52; L96; L98; R23

Suggested Citation

Briglauer, Wolfgang and Dürr, Niklas and Falck, Oliver and Hüschelrath, Kai, Does State Aid for Broadband Deployment in Rural Areas Close the Digital and Economic Divide? (October 6, 2016). ZEW - Centre for European Economic Research Discussion Paper No. 16-064, Available at SSRN: https://ssrn.com/abstract=2848889 or http://dx.doi.org/10.2139/ssrn.2848889

Wolfgang Briglauer

WU Vienna ( email )

Welthandelsplatz 1 1
Wien, 1020
Austria

Niklas Dürr

ZEW – Leibniz Centre for European Economic Research - Competition and Regulation Research Group ( email )

L7,1
Mannheim, 68161
Germany

Oliver Falck (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Department Human Capital and Innovation ( email )

Poschingerstr. 5
Munich, 81679
Germany

Kai Hüschelrath

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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