Increasing Broadband Internet Penetration
In the OIC Member Countries
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0.5% to employment growth. Like the relationship between broadband and GDP growth, the
contribution of broadband to employment is also conditioned by a number of special effects.
Studies have particularly focused on two specific questions:• Does the impact of broadband on employment differ according to industry sector?
• Is there a decreasing return in employment generation linked to broadband
penetration?
As with GDP, the spillover employment effects of broadband are not uniform across sectors.
According to Crandall et al. (2007), the job creation impact of broadband tends to be
concentrated in service industries, (e.g., financial services, education, health care, etc.)
although the authors also identified a positive effect in manufacturing. In another study,
Shideler et al. (2007) found that, for the state of Kentucky in the United States, county
employment was positively related to broadband adoption in multiple sectors, including
manufacturing and certain services. The only sector where a negative relationship was found
with the deployment of broadband (0.34% – 39.68%) was the lodging and food services
industry. This was the result of a particularly strong capital/labor substitution process taking
place, whereby productivity gains from broadband adoption yield reduced employment.
Similarly, Thompson and Garbacz (2008) concluded that, for certain industries, “there may be
a substitution effect between broadband and employment”5. It should therefore be considered
that the productivity impact of broadband can cause capital-labor substitution and may result
in a net reduction in employment.
This specific effect has been analyzed by Katz et al. (2010) for rural economies of the United
States. In this research, it was found that, within rural counties, broadband penetration
contributes to job creation in financial services, wholesale trade and health sectors. This is the
result of enterprise relocation enabled by broadband, which benefits primarily urban
communities in the periphery of metropolitan areas (Katz et al. 2010d). In fact, research is
starting to pinpoint different employment effects by industry sector. Broadband may
simultaneously cause labor creation triggered by innovation in services and a productivity
effect in labor-intensive sectors. Nevertheless, while a robust explanation of the precise effects
by sector and the specific drivers in each case is still missing, it is reasonable to expect that the
deployment of broadband should not have a uniform impact across a national territory.
Some researchers have also found a decreasing impact of broadband on employment. While
Gillett et al. (2006) observed that the magnitude of impact of broadband on employment
increases over time, they also found that the positive contribution of broadband to
employment tends to diminish as penetration increases. This finding may support the
existence of a saturation effect. Coincidentally, Shideler et al. (2007) also found a negative
statistically significant relationship between broadband saturation and employment
generation. This would indicate that at a certain point of broadband deployment, the capability
of the technology to have a positive contribution to job creation starts to diminish.
5 This effect was also mentioned by Gillett et al. (2006).