Elena Grinza (University of Torino)

LABOR Seminar – Advanced Digital Technologies and Labor Market Outcomes

Abstract. This paper investigates the effects of ultra-fast broadband (UBB) availability on firms’ employment levels and their workforce composition. We utilize a unique and comprehensive municipality-level dataset on the deployment of UBB connections in Italy, which began in 2015. By using information on firms’ locations, we match this municipality-level data set with rich administrative matched employer-employee data from 2012 to 2019. To address the endogeneity of UBB, we leverage the physical distance between each municipality and the nearest optical packet backbone node. Our instrumental variable regressions suggest a positive and significant effect of UBB on firm-level employment. Among incumbent firms, the positive impact on overall firm-level employment is driven by high-skill jobs held by experienced workers in managerial positions, particularly in the high-tech sector. In contrast, when considering firm entry and exit dynamics, the overall positive employment impact appears to be concentrated among inexperienced blue-collar jobs, especially in the lower-tier wage distribution, and in low-tech firms. This suggests substantially differentiated UBB effects on the labor market.