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

34 Pages Posted: 17 May 2018

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: March 21, 2018

Abstract

We evaluate the impact of a major European state aid programme for broadband deployment applied to rural areas in the German state of Bavaria in the years 2010 and 2011. Using matched difference-in-differences estimation strategies, we find that aided municipalities have – depending on broadband quality – between 18.4 and 25.4 percentage points higher broadband coverage than non-aided municipalities. This increase in broadband coverage, closing the digital divide, results in an average increase of six employed individuals living in the respective aid-receiving municipalities while leaving the number of employed (measured at the place of work) or self-employed individuals and wages unaffected. We therefore conclude that an increase in broadband coverage through state aid protects 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: D620, D730, G380, H230, J230, K230, L520, L960, L980, R230

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? (March 21, 2018). CESifo Working Paper Series No. 6947, Available at SSRN: https://ssrn.com/abstract=3179949 or http://dx.doi.org/10.2139/ssrn.3179949

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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