For immediate release — August 5, 2014
Rural economies found to benefit from broadband
A team of researchers has come one step closer to showing that broadband is an engine for growth in rural U.S. communities, especially when a large segment of the population adopts the technology. Their findings are among the first to provide evidence to support a long-held assumption that rural economies are boosted by broadband.
“When broadband first came out, there were all sorts of claims that it would be great for rural areas, but until now we really hadn’t seen any firm evidence on whether broadband impacts economic growth in these areas,” said Brian Whitacre, an associate professor of agricultural economics at Oklahoma State University who led the study. “We found that rural counties that did a good job of adopting broadband had higher rates of income growth and lower rates of unemployment growth.”
The researchers used 2010 U.S. county-level data to compare all non-metro counties in terms of their broadband availability and adoption. They then compared these counties in terms of their economic growth between 2001 and 2010, using indicators like household income, employment growth, and number of firms. When they analyzed the two data sets together, they found a significant relationship between broadband adoption and economic growth.
For example, counties with a high level of broadband adoption — those in which 60 percent or more of the households had a wired high-speed internet connection — experienced higher income growth and saw a smaller increase in unemployment rates than did counties that did not reach the 60 percent threshold. Similarly, counties with low adoption rates — those in which less than 40 percent of the households had broadband — saw lower growth in their numbers of businesses and total numbers of employees. The researchers found that broadband availability alone was far less important to growth than adoption — a point that has important policy implications, said Whitacre.
“If you look at how we’ve been spending money, the vast majority goes to establishing infrastructure in rural areas. There’s not much being spent on showing people what can be done with broadband, or getting people to use it productively,” he said. “We might want to spend more public funds on promoting adoption, as opposed to just giving people access by subsidizing the providers.” This could range from teaching elderly citizens how to use a computer, to giving businesses training in selling online or establishing a social media presence.
The findings, which are published in the most recent issue of Telecommunications Policy, are among the first to show broadband’s impact specifically on rural U.S. economies. But the researchers also wanted to get at causality. Was the economic growth they observed a result of broadband adoption, or were good economic conditions driving broadband adoption? To get an answer, the team employed a statistical model that helped them look at their data through a historical lens.
“We went back to data from 2001, before broadband was even available, and we looked at things that might predict a county’s future broadband adoption, like income, education, race, population, and historical growth rates,” explained Whitacre. “Based on these measures, we matched counties that were very similar, and then looked at their actual 2010 broadband adoption.”
Some of these counties went on to obtain very high levels of broadband adoption and others did not, creating a set of “otherwise similar” counties that were very similar in all measures except for their broadband adoption. That is, the only thing the researchers found to account for the differences in economic growth among otherwise similar counties was the adoption of broadband. And while this strongly suggests causality, the researchers noted that they aren’t making any strict claims.
“There are certain unobservable community traits that may account for the differences between these otherwise similar counties. For example, maybe a county did a really great job recruiting an outside firm or promoting entrepreneurship,” said Whitacre. “We wouldn’t be able to account for that in our model.” Whitacre emphasized, however, that the relationship they uncovered could potentially be a causal one. “If you don’t have a lot of people adopting broadband in these rural areas, there will be fewer jobs created in a community’s online sector. If people aren't banking online, then the local banks won't be hiring to cater to the online community. If residents aren’t engaging with social media, then the local businesses aren’t going to be hiring social media staff.”
In addition to Whitacre, the research team included Roberto Gallardo, an associate extension professor at the Mississippi State University Extension Center for Technology Outreach and Sharon Strover, the Philip G. Warner Regents Professor in Communication at the University of Texas.
This research was funded by the National Agricultural and Rural Development Policy Center (NARDeP), which was organized in 2012 by the four U.S. Regional Rural Development Centers and is funded by the USDA National Institute of Food and Agriculture (NIFA) under a competitive grant (Number 2012-70002-19385). A virtual center based at Penn State University and the Northeast Regional Center for Rural Development, it engages land-grant universities as well as national organizations, agencies, and experts to develop and deliver timely policy-relevant information around signature areas identified by its advisory boards. More information about NARDeP is available at www.nardep.info.
Brian Whitacre, Oklahoma State University
telephone: (405) 744-9825