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Broadband and development: evidence and new research directions from Latin America (BID presentation)

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Presentación elaborada para el Banco Interamericano de Desarrollo (BID).

Presentación elaborada para el Banco Interamericano de Desarrollo (BID).

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  • NotonlytheoreticalinterestSomeinitiatives are little more thandeclarations, othersinvolvesignificantspendingIn othercountriestheseinvestments are undertakenbythepublictelecomsoperator (e.g., Ecuador, Uruguay and Venezuela)X% of social spending
  • Twotypes of initiatives: connectivity and equipmentMany other initiatives at the state or municipal level
  • Two additional elements: threshold effect (only after 10%) and nonlinear effect (grows with penetration)
  • Mayo and Wallsten replicate Crandall for recent period and find no effect.Forman find effect limited to wealthier 6%
  • Debate about non instrumental uses.General equilibrium question: can these offset skill bias or “hollowing out”?
  • Transcript

    • 1. > BROADBAND AND DEVELOPMENT: EVIDENCE AND NEW RESEARCH DIRECTIONS FROM LATIN AMERICA HERNAN GALPERIN, PH.D. Associate Professor, Universidad de San Andrés Diálogo Regional sobre la Sociedad de la Información (DIRSI) September 26, 2013 Inter-American Development Bank, Washington D.C., September 26, 2013
    • 2. > TABLE OF CONTENTS Project motivation and description: Why (and how to) study the development impact of broadband? Opening the black box: What we do – and don't – know about the links between broadband and poverty alleviation. The economic impact of broadband : Evidence from Colombia and Ecuador. >1 >2 >3
    • 3. > PUBLIC INVESTMENT ON BROADBAND INITIATIVES IS ON THE RISE IN LATAM, SOME ARE VERY SIGNIFICANT (UP TO 0.78% OF GDP) 0 5 10 15 20 25 2006 2007 2008 2009 2010 2011 2012 Countries with National Broadband Plan (2012) ARGENTINA BRAZIL COLOMBIA NAME OF INITIATIVE Argentina Conectada Plano Nacional de Banda Larga (PNBL) Vive Digital GEOGRAPHICAL TARGET 100% municipalities 76% municipalities 62% municipalities PRICE/QUALITY TARGET 10Mbps 1Mbps at US$ 20 per month 1Mbps TOTAL INVESTMENT $1.8 billion USD $3.25 billion USD $2.25 billion USD TOTAL PER CAPITA $44.2 USD $16.6 USD $48.6 USD TOTAL AS % GDP 0.4% 0.13% 0.78% DURATION 2011-2015 2010-2014 2010-2014 > Source: ITU/CISCO (2013)
    • 4. > INVESTMENTS IN ICT FOR EDUCATION PROGRAMS ARE EQUALLY SIGNIFICANT (UP TO 10% OF TOTAL EDUCATION EXPENDITURE) > Source: UNESCO ARGENTINA BRAZIL URUGUAY NAME OF INITIATIVE Conectar Igualdad Programa Banda Larga nas Escolas Plan Ceibal TARGET Secondary Primary and secondary Primary and secondary CONNECTIVITY No Yes Yes EQUIPMENT Yes (laptop) No Yes (OLPC) TOTAL ANNUAL INVESTMENT ~700M USD n/a ~50M USD TOTAL AS % EDUCATION EXPENDITURE 10% n/a 5% YEAR STARTED 2010 2010 2008 0 5 10 15 20 25 30 35 40 45 50 Primary Secondary Countries with ICT in Education programs
    • 5. Does the evidence about positive impacts support these public investments? How are benefits being appropriated? How large are impact externalities? What is the distributional impact? How cost-effective are these programs? How to improve program design and implementation? > > > > PROJECT MOTIVATION: RECENT PUBLIC INVESTMENTS IN BROADBAND RAISE QUESTIONS ABOUT DEVELOPMENT IMPACT
    • 6. > THE OPTIMISTIC PERSPECTIVE: BROADBAND AVAILABILITY AND ADOPTION BOOST EMPLOYMENT AND ACCELERATE GDP GROWTH AUTHOR(S) DATA METHODOLOGY RESULTS QIANG AND ROSSOTTO (2009) 120 countries, 1980-2006. OLS 10 p.p. increase in broadband yields an additional 1.38 p.p. of GDP growth. KOUTROUMPIS (2009) 22 OECD countries, 2002–2007. Simultaneous equations model and instrumental variables. A 10% increase in broadband increases GDP growth by an average of 0.25% CZERNICH ET AL. (2011). 25 OECD countries, 1996-2007. Instrumental variables. A 10 p.p. increase in broadband raises annual per-capita growth by 0.9-1.5 p.p. LEHR ET AL. (2006). ZIP codes and states (US), 1998–2002. OLS Broadband availability increases employment by 1.5% and businesses by 0.5%. No effect on wages. CRANDALL, R. ET AL. (2007). States (USA), 2003-2005. OLS A 10% increase in the penetration rate increases employment by 2%. No effect on GDP growth.
    • 7. > SOME CAVEATS ABOUT THE (OVERLY) OPTIMISTIC PERSPECTIVE Causal attribution is problematic  reverse causality needs to be addressed in study design. Aggregated data at country or state level  small samples, difficult to find appropriate controls. Little conceptualization about the underlying mechanisms through which broadband affects growth or employment. > > > Some recent studies are less optimistic (e.g., Mayo and Wallsten, 2011; Forman et al., 2012). >
    • 8. > PROJECT OVERVIEW Six quasi-experimental studies based on existing microdata. > Counterfactuals in order to address reverse causality problem. > Very large samples: ability to test for heterogeneous impacts, external validity (unlike RCT). Qualitative study in low-income communities in Mexico to validate results and get in-depth perspective on impact mechanisms. Extensive lit review about microfoundations of the link between broadband and development > Focus on poverty alleviation >1 >2 >3
    • 9. > THREE CASE STUDIES LOOKING AT BROADBAND IMPACT ON GROWTH AND EMPLOYMENT CASE STUDY COUNTRY DATA SOURCES METHODOLOGY INTERNET AND ECONOMIC ACTIVITY IN COLOMBIA : AN ANALYSIS AT THE LEVEL OF MUNICIPALITIES AND 23 MAJOR CITIES. Colombia Panel of municipalities (2005- 2011). Number of observations: 5,000 municipalities. Annual household survey from DANE and deployment information from by Ministry of ICT. Panel data with random effects and instrumental variable. IMPACT OF BROADBAND DEPLOYMENT IN ECUADOR. Ecuador Panel of individuals in urban areas 2009-2011. Number of observations: 24,000 individuals. National Household Survey and deployment data from Ministry. Difference-in-difference. THE WELFARE IMPACT OF BROADBAND IN MEXICO. Mexico Number of observations: 7,000. National household survey from INEGI. Structural equation models.
    • 10. > THREE CASE STUDIES LOOKING AT BROADBAND IMPACT ON SCHOOL PERFORMANCE CASE STUDY COUNTRY DATA SOURCES METHODOLOGY CONNECTED TO LEARN? THE EFFECT OF BROADBAND INTERNET ON SCHOOL QUALITY IN BRAZIL. Brazil Panel data of students and teachers 2007-2011. Number of observations: between 83,000 and 124,000. School census and test scores (Prova Brasil) from Ministry of Education. Administrative data for PBLE from ANATEL. Regression models that exploit the phase-in of the program. CAN INFORMATION AND COMMUNICATION TECHNOLOGIES (ICTS) HAVE A POSITIVE IMPACT ON STUDENT PERFORMANCE? EVIDENCE FROM CHILE. Chile Two cohorts of primary-level students in public schools (2005-2011). Number of observations: between 110,000 and 133,000. Test scores (SIMCE) and information about ENLACES program from Ministry of Education. Difference-in-difference with matching. INTERNET ACCESS, TYPE OF ACCESS AND EDUCATIONAL OUTCOMES: EVIDENCE FOR THE PERUVIAN CASE. Peru Panel data of students at school level (2007-2011). Number of observations: 10,000. School Census and test scores data from Ministry of Education. Difference-in-difference with matching.
    • 11. > OPENING THE BROADBAND BLACK BOX: (1) THE GROWTH EFFECT HYPOTHESIS 1: broadband adoption has a positive growth effect. > Critical for poverty reduction: growth explains 75% of poverty reduction in LATAM between 1990 and 2010 (Cruces et al., 2013) Lit review suggests that: > Broadband raises firm productivity, but only under certain conditions (e.g., Colombo et al., 2012)  classic pattern of GPT. > Broadband improves resource allocation by lowering transaction costs and improving coordination (e.g., Goyal, 2010). > Broadband improves labor matching (e.g., Kuhn and Mansour, 2011). > >
    • 12. > THE GROWTH EFFECT: STYLIZED FACTS INCREASE IN PRODUCTIVITY BETTER MARKET COORDINATION BETTER LABOR MATCHING Growth effectFIRM ADOPTION OF BROADBAND HH ADOPTION OF BROADBAND > > > > > >
    • 13. > > > OPENING THE BROADBAND BLACK BOX: (2) THE EMPLOYMENT EFFECT Lit review suggests that: > Broadband reduces friction in labor markets (e.g., Autor, 2001). > Broadband promotes acquisition of ICT skills with labor market payoffs (e.g., Blanco and Lopez Boo, 2010). > Broadband promotes weak social ties (Granovetter, 2005). HYPOTHESIS 2: broadband adoption has a positive employment/wage effect. > Improvements in employment are critical factor for sustained poverty alleviation. > But ICT effects on employment are not clear  skill bias (Autor, Katz and Krueger, 1998) and “hollowing out” hypotheses.
    • 14. INCREASE SOCIAL CAPITAL BETTER LABOR MATCHING> > >FIRM ADOPTION OF BROADBAND > THE GROWTH + EMPLYMENT EFFECTS: STYLIZED FACTS + INCREASE IN PRODUCTIVITY BETTER MARKET COORDINATION Growth effect HH ADOPTION OF BROADBAND BROADBAND IN SCHOOLS > > > ICT SKILLS ACQUISITION Employment effect>> > >
    • 15. > > > OPENING THE BROADBAND BLACK BOX: (3) THE GOVERNANCE EFFECT HYPOTHESIS 3: broadband adoption has a positive governance effect. Poverty and poor governance are mutually reinforcing: > Poverty prevents human capital accumulation and increases political instability (Easterly, 2006) > Poor institutions breed poverty (Robinson and Acemoglu, 2011) > Lit review suggests that: > Broadband adoption promotes accountability (e.g., Gonçalves, 2009; Bjorkman and Svensson, 2007). > Broadband access promotes civic engagement (Stern et al., 2011).
    • 16. > THE GROWTH + EMPLOYMENT + GOVERNANCE EFFECTS: STYLIZED FACTS BETTER MARKET COORDINATION BETTER LABOR MATCHING INCREASE SOCIAL CAPITAL Growth effect HH ADOPTION OF BROADBAND BROADBAND IN SCHOOLS FIRM ADOPTION OF BROADBAND ICT SKILLS ACQUISITION INFORMATION GAINS Employment effect INCREASE IN PRODUCTIVITY Governance effect > > > > > + + > > > > > > > > > >
    • 17. 0 50 100 150 200 250 300 350 400 450 2006-1 2006-2 2007-1 2007-2 2008-1 2008-2 2009-1 2009-2 2010-1 2010-2 2011-1 2011-2 2012-1Tr 0 500 1000 1500 2000 2500 3000 3500 2006-4 2007-2 2007-4 2008-2 2008-4 2009-2 2009-4 2010-2 2010-4 2011-2 2011-4 Total Internet ≥ 256 ≥ 512 ≥ 1024 > COLOMBIA CASE: BASIC FACTS Colombia: Internet and broadband subscribers (in 000s), 2006-11 Colombia: Corporate broadband subscribers (in 000s), 2006-12
    • 18. > COLOMBIA: DATA, METHOD AND KEY QUESTIONS > . Panel of municipalities between 2005-2011 (~ 5,000 obs.) . Sources: HH survey (GEIH), MinTIC, and DNP. . OLS regressions, IV =average slope of terrain. . Proxies for economic activity: tax revenues and # firms. . Basic model: . Key questions: > Does faster broadband adoption yield more economic activity (growth effect)? > Is the effect different for HH vs. corporate adoption? > Does access speed matter (256 vs. 512 vs. 1024kbps)?
    • 19. > COLOMBIA: KEY FINDINGS > . Broadband has a positive impact on economic activity > A 10% increase in penetration yields 0,4% in tax revenues > A 10% increase in penetration yields 4% in # firms . The magnitude of effects is similar for HH and corporate adoption > HH adoption also has effect on # firms . The magnitude of effects is similar for different speed levels > What really matters is connectivity, not speed
    • 20. > ECUADOR: BASIC FACTS > . Until 2009 broadband supply outside main cities was very limited . Between 2010 and 2011 CNT invested heavily in extending coverage to urban (and some rural) areas . Opportunity to compare changes in employment and income in: > Treatment group: cantones connected in 2010-11 (27 cantones with pop. 2.3M) > Control group: cantones already connected in 2009 (10 cantones with pop. 6.1M)
    • 21. > ECUADOR: DATA, METHOD AND KEY QUESTIONS > . Panel of individuals between 2009-2011 reporting labor income and ICT module: > Treatment group: 8,785 individuals > Control group: 7,664 individuals . Sources: National HH survey and SENATEL. . T-test reveals groups have similar mean in variables of interest at baseline (2009) . Basic model: . Key questions: > Has income raise more in municipalities connected in 2010-2011? > Are there differences between adopters and non adopters? > Are there heterogeneous effects (by age/gender/occupations)?
    • 22. > ECUADOR: KEY FINDINGS > . Broadband has a positive impact on labor income (regardless of adoption) > Increase in individual labor income of $25,7 USD over 2-year period > 7.5% increase over initial sample average (3.6% per year) . The effect is larger for those adopting broadband > Increase in individual labor income of $51,8 USD over 2-year period > 10,3% increase over initial sample average (5% per year) . The overall effect is larger for men than for women > Yet gender difference disappears among broadband adopters
    • 23. More information: www.dirsi.net hgalperin@udesa.edu.ar

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