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Firm relocation with consequent impact on employment and payroll Growth in the number of establishments that benefit from lower real estate costs while serving the large metropolitan markets Facilitation of telecommuting with consequent reduction in transportation costs and less quantifiable increase of consumer surplus
The research literature has pointed out the direct relationship existing between economic impact of broadband and proximity to urban concentrations. Reasons could range from supply side (e.g. economics of deployment favor early entry of competitive providers) to demand side (e.g. sectoral composition of the economy emphasizing industries with high transaction costs).
In their evaluation of the USDA Broadband Loan Program, Kandilov and Renkow (2010) found that the communities closest to urban centers benefited substantially from loans for broadband deployment309. In particular, they determined that the broadband economic impact in metropolitan counties is higher than in those rural counties lying in the periphery of metropolitan areas. Nevertheless, broadband deployment appears to impact employment and, minimally, the number of establishments in rural counties. Why is broadband having some, albeit attenuated, positive effect in rural counties adjacent to metropolitan areas? The analysis the authors perform by industry indicates that the strongest positive contribution of broadband to employment and payroll lies in the transportation and warehousing sector. This would confirm the trend that metro‐adjacent rural counties benefit from relocation of firms to the periphery enabled by broadband and related infrastructure.
A similar finding was reached by Burton and Hicks (2005) in their study of the Central Appalachian region, according to which new businesses are unlikely to locate in areas without broadband. The study concludes that, while broadband is not a significant indicator of firm productivity in general, for firms of the same age, productivity increases 14‐17 % if located in a broadband area. As such, there is a “tendency for productive firms to locate in places with broadband”. This finding is also supported by a study of the impact of Iowa’s Municipal Telecommunications Network (2003) on the relative success of the previously “bedroom community” Cedar Falls, IA over the neighboring community of Waterloo310:
Shideler et al. (2007) also found that broadband deployment had a statistically significant positive impact on overall employment in Kentucky, accounting for between 0.14% and 5.32% of overall employment growth during the observed period. It also found that additional broadband deployment was most effective at stimulating employment growth in locales that already had an 309
The authors mention that, according to a program audit, it was found that between 2005 and 2008, broadband loans were extended to 148 communities within 30 miles for cities with populations greater than 200,000. 310 As a note, neither of the areas can really be considered rural; Cedar Falls had a population of 36,000 and Waterloo had a population of 69,000, making them much more “small city” or suburban.
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