Media Briefings

Broadband Boosts Growth

  • Published Date: May 2011

Expanding a country’s broadband infrastructure dramatically increases national economic
growth. According to research by Nina Czernich and colleagues, a 10 percentage point
increase in the proportion of the population with access to high-speed broadband internet
can raise annual growth per person by up to 1.5 percentage points.
Their study, published in the May 2011 issue of the Economic Journal, analyses the
economic growth of 25 OECD countries between 1996 and 2007. It finds that if the UK had
as much broadband in 2003 as the leading broadband users in the OECD, its GDP per
capita by 2007 could have been around £1,350 higher.
The authors describe broadband internet as a ‘general purpose technology’, which
fundamentally changes how and where economic activity is organised. It supports new
business models, allowing information to be shared more quickly and stored more
efficiently. This can lead to lower start-up costs for new companies, greater competition,
increased labour productivity and ultimately stronger economic growth.
The authors conclude that to increase investment in broadband infrastructure, regulatory
institutions should provide incentives for the private sector to invest in broadband rather
than relying on government interventions. Private investment increases an economy’s longterm
growth path without increasing government debt.
Modern economic growth is driven by innovation and knowledge. Access to fast internet via
broadband infrastructure facilitates their diffusion. High-speed internet via broadband
infrastructure facilitates the spatial distribution of large batches of information that
previously had to be co-located, which in turn allows for new business models and
collaboration of firms producing specialised inputs.
By facilitating decentralised information processing and supporting new working modes,
broadband has an impact on growth distinct from other technologies emerging around the
same time. This study estimates that a 10 percentage point increase in broadband
penetration raises annual per capita growth by between 0.9 and 1.5 percentage points.
The study analyses the growth experience of 25 OECD countries between 1996 and 2007.
In 2003, the broadband penetration rate in Germany was about 10 percentage points below
the leading OECD countries. The size of the estimated effect suggests that German GDP
per capita would have been between 3.7% and 5.9% higher in 2007 if Germany had been
among the leading broadband countries in 2003 (see Figure).
Notes for editors: ‘Broadband Infrastructure and Economic Growth’ by Nina Czernich,
Oliver Falck, Tobias Kretschmer and Ludger Woessmann is published in the May 2011
issue of the Economic Journal.
Nina Czernich is at the Ifo Institute for Economic Research at the University of Munich.
Oliver Falck is at the Ifo Institute, CESifo and the Max Planck Institute of Economics. Tobias
Kretschmer is at the Institute for Strategy, Technology and Organization and the Ifo Institute
at the University of Munich, and the Centre for Economic Performance. Ludger Woessmann
is at the University of Munich, the Ifo Institute, CESifo and IZA.
For further information: contact Nina Czernich on +49 89 9224 1309 or +49 176 2000
4180 (email:; Oliver Falck via email:; Tobias Kretschmer via
email:; Ludger Woessmann via email:; or
Romesh Vaitilingam on +44-7768-661095 (email: