Brookings Institute links high speed internet to economic growth

The case for universal high speed internet access just got even stronger.

A new study from the Brookings Institute shows a clear relationship between high speed internet access and increased economic growth. By comparing FCC data on high speed internet penetration from 2003 to 2005 with corresponding data on economic output and employment--and by controlling for outside variables that affect economic growth--authors Robert Crandall, William Lehr, and Robert Litan concluded that expansion of high speed internet access directly leads to a stronger economy:

We find 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” (the national unemployment rate being as low as it can be with a low, stable rate of inflation). At a more disaggregated level, we find that employment in both manufacturing and services industries (especially finance, education and health care) is positively related to broadband penetration. We also find that state output of goods and services is positively associated with broadband use…

Access to high speed internet has far-reaching effects. It boosts the efficiency and productivity of our nation's workforce. It opens up enormous opportunities for America's small businesses. It leads to increased technological innovation. And it creates many quality, well paying jobs.

As encouraging as the Brookings study is, it probably underestimates the true value of high speed internet, due to the difficulty in measuring its effect on the economy as a whole. Moreover, the future likely holds even more benefits from high speed internet access. As the Brookings report authors note,

Because broadband is an important basic infrastructure that is expected to produce spillover and wide-reaching benefits across the economy, it will take time for the full effects of broadband to be realized. And, as we explain further below, measuring the impact of broadband will present an ongoing challenge for economists and other analysts that is especially acute at this early stage in broadband's lifecycle. The early indications of significant positive economic impacts presented here on key macroeconomic data such as jobs and output growth is indicative and supportive of the widespread view that broadband is indeed essential infrastructure.

The Effects of Broadband Deployment on Output and Employment: A Cross-sectional Analysis of U.S. Data (Brookings Institute)