July 2007

"[A]ll levels of government should follow policies that encourage broadband competition, which will lead to lower prices and hence greater use."

-- in "The Effects of Broadband Deployment on Output and Employment" June 2007

Employment is positively associated with broadband use

Robert Crandall, William Lehr and Robert Litan

This study provides new estimates of the effects of broadband penetration on both output and employment, in the aggregate and by sector, using state level data. The study finds that nonfarm private employment and employment in several industries, is positively associated with broadband use. More specifically, for every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2 to 0.3 percent per year. For the entire U.S. private non-farm economy, this suggests an increase of about 300,000 jobs, assuming the economy is not already at “full employment.” At a more disaggregated level, the authors find that employment in both manufacturing and services industries (especially finance, education and health care) is positively related to broadband penetration. They also find that state output of goods and services is positively associated with broadband use, although probably because of noise in the underlying data, our estimates are not statistically significant.

Robert Crandall and Robert Litan are Senior Fellows in the Economic Studies Program at the Brookings Institution. William Lehr is a Research Associate with the Communications Futures Program at MIT. Crandall, Litan, and Lehr have consulted for AT&T on various matters in the past, and Lehr has also consulted for other telecommunications firms. The authors are grateful for the excellent research assistance of David Burk of Brookings.