Breaking invisible barriers: does fast internet improve access to input markets?

Working paper

This paper explores how improved internet infrastructure impacts supply chains and economic activity, focusing on Türkiye. Using the expansion of fiber-optic networks and firm-to-firm transaction data, we find that better connectivity shifts input sourcing to well-connected regions and diversifies supplier networks. We estimate a spatial equilibrium model with endogenous network formation and rational inattention and find that high-speed internet reduced information acquisition and communication costs. Enhanced connectivity increased real income by 2.2% in the median province. Our findings underscore the importance of digital infrastructure investments in fostering economic growth by improving supply chain efficiency and broadening firms’ access to suppliers.

Authors: Demir, B; Javorcik, B; Panigrahi, P

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2024-12-12
• Paper number: 1061
• Language: English