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Speed 2.0: Evaluating access to universal digital highways

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Title: Speed 2.0: Evaluating access to universal digital highways
Authors: Valletti, T
Ahlfeldt, G
Koutroumpis, P
Item Type: Journal Article
Abstract: This paper shows that having access to a fast Internet connection is an important determinant of capitalization effects in property markets. Our empirical strategy combines a boundary discontinuity design with controls for time-invariant effects and arbitrary macro-economic shocks at a very local level to identify the causal effect of broadband speed on property prices from variation that is plausibly exogenous. Applying this strategy to a micro data set from England between 1995 and 2010 we find a significantly positive effect, but diminishing returns to speed. Our results imply that disconnecting an average property from a high-speed first generation broadband connection (offering Internet speed up to 8 Mbit/s) would depreciate its value by 2.8%. In contrast, upgrading such a property to a faster connection (offering speeds up to 24 Mbit/s) would increase its value by no more than 1%. We decompose this effect by income and urbanization, finding considerable heterogeneity. These estimates are used to evaluate proposed plans to deliver fast broadband universally. We find that increasing speed and connecting unserved households passes a cost-benefit test in urban and some suburban areas, while the case for universal delivery in rural areas is not as strong.
Issue Date: Jul-2017
Date of Acceptance: 6-Feb-2016
URI: http://hdl.handle.net/10044/1/31042
DOI: 10.1093/jeea/jvw013
ISSN: 1542-4766
Publisher: Oxford University Press (OUP)
Start Page: 586
End Page: 625
Journal / Book Title: Journal of the European Economic Association
Volume: 15
Issue: 3
Copyright Statement: © The Author 2017. Published by Oxford University Press on behalf of European Economic Association. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.
Sponsor/Funder: Engineering & Physical Science Research Council (E
Engineering & Physical Science Research Council (EPSRC)
Funder's Grant Number: EP/N023242/1
Keywords: Social Sciences
Business & Economics
14 Economics
Publication Status: Published
Online Publication Date: 2017-01-09
Appears in Collections:Imperial College Business School