Breaking Invisible Barriers: Does Fast Internet Improve Access to Input Markets?

Banu Demir, Beata Javorcik and Piyush Panigrahi

No 19827, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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.

Date: 2025-01
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