The contribution of US broadband infrastructure subsidy and investment programs to GDP using input-output modeling (2311.02431v5)

Abstract: More than one-fifth of the US population does not subscribe to a fixed broadband service despite broadband being a recognized merit good. For example, less than 4% of citizens earning more than US \$70k annually do not have broadband, compared to 26% of those earning below US \$20k annually. To address this, the federal government has undertaken one of the largest broadband investment programs ever via The Bipartisan Infrastructure Law, with the aim of addressing this disparity and expanding broadband connectivity to all citizens. We examine broadband availability, adoption, and need for each US state, and then construct an Input-Output model to explore the potential structural macroeconomic impacts of broadband spending on Gross Domestic Product (GDP) and supply chain linkages. In terms of macroeconomic impact, the total potential indirect contribution to US GDP by the program could be as high as US \$84.8 billion, \$32.7 billion, and \$9.78 billion for the Broadband Equity, Access, and Deployment program, the Affordable Connectivity Program, and additional programs, respectively. Thus, overall, the broadband allocations could expand US GDP by up to US \$127.3 billion (0.10% of annual US GDP over the next five years). Moreover, the broadband packages within the Bipartisan Infrastructure Law could create up to 230,000 jobs (0.14% labor market increase). We contribute one of the first economic impact assessments of the US Bipartisan Infrastructure Law to the literature.

• The paper estimates that federal broadband investments could contribute up to US $127.3 billion to GDP over five years using Input-Output modeling.
• It demonstrates that such investments could create approximately 230,000 jobs, highlighting significant sectoral spillover effects.
• The study underscores the role of targeted funding in reducing digital divides, emphasizing programs like BEAD and ACP for economic development.

Overview of "The contribution of US broadband infrastructure subsidy and investment programs to GDP using Input-Output modeling"

This paper, authored by Matthew Sprintson and Edward Oughton, presents a detailed evaluation of the economic impacts stemming from US federal broadband infrastructure programs, primarily under the auspices of The Bipartisan Infrastructure Law. The focus is on assessing the potential contributions of these programs to the United States' GDP, utilizing sophisticated Input-Output (IO) modeling to explore both direct and indirect macroeconomic effects.

The paper's premise rests on addressing disparities in broadband access, as nearly 20% of the US population does not have fixed broadband service. The Bipartisan Infrastructure Law aims to mitigate such disparities through significant investments focused on enhancing broadband infrastructure and accessibility, targeting socioeconomic barriers that have historically hindered broadband adoption.

Key Findings and Implications

1. Economic Impact via GDP Contributions: The authors employ an IO modeling approach to quantify the fiscal output associated with broadband investments. The paper estimates substantial potential contributions to US GDP, including up to US $127.3 billion over five years, which represents about 0.10% of annual US GDP during this period. This impact underscores the importance of broadband infrastructure as a factor in national economic growth.
2. Job Creation Prospects: Beyond GDP impacts, the paper indicates potential creation of up to 230,000 jobs, equating to a 0.14% increase in the labor market. The distribution of job creation spans various sectors, with significant growth posited in professional, scientific, and technical services, as well as education and manufacturing sectors.
3. Targeted Investment Allocation: The paper delineates the allocation of funds through different programs such as the Broadband Equity, Access, and Deployment (BEAD) program, the Affordable Connectivity Program (ACP), and smaller initiatives. Investment is strategically directed toward unserved and rural regions, reflecting the intent to bridge existing digital divides and ensure equitable internet access.
4. Inter-Industry Linkages and Sectoral Impacts: Analysis also extends to the supply chain effects of broadband investments, illustrating sectoral dependencies on telecommunications infrastructure. Prominent growth is anticipated in information services and professional sectors, highlighting the pervasive role of broadband in enabling digital transformation across industries.
5. Policy Implications and Critiques: Despite the observed potential for positive economic returns, the paper also highlights complexities associated with policy implementation and fiscal sustainability. The deployment of substantial federal funds raises questions about deficit spending and long-term economic viability, suggesting that future research could further elucidate the balance between infrastructure investments and fiscal prudence.

Theoretical and Practical Insights

Theoretically, the paper enriches the literature by providing empirical evidence of the economic ramifications tied to broadband infrastructure investments using the IO modeling paradigm. This aligns with prior economic growth theories that posit infrastructure as a foundational element for development. Practically, it elucidates potential pathways for policy-makers to navigate the broader socio-economic landscape, offering a framework to address digital divides and assess macroeconomic strategies.

Future Developments

This paper opens avenues for further research into dynamic macroeconomic modeling, investigating long-term socio-economic impacts beyond static IO analyses. Additionally, exploring detailed micro-level data could offer deeper insights into income disparity and technology adoption challenges. Enhanced methodologies could refine impact assessments related to broadband expenditure, offering invaluable guidance for future digital infrastructure policies.

In summary, Sprintson and Oughton's paper provides a quantitative and nuanced analysis of the positive potential outlays by federal broadband programs, illustrating the indispensable role of broadband infrastructure within contemporary economic discourse and policy execution.