Broadband Access and Markups in Europe

Emilio Colombo (), Luca Michele Portoghese () and Patrizio Tirelli ()

No dis2505, DISEIS - Quaderni del Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo from Università Cattolica del Sacro Cuore, Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo (DISEIS)

Abstract: What is the relationship between internet (broadband) connectivity shocks, markups, and fixed costs? We address the issue by exploiting a large dataset based on balance sheets of European firms. Broadband shocks raise sales, profits-to-sales ratios, fixed costs, and markups of firms that are large, are more efficient (high TFP) and already bear large fixed costs. For these firms, the shock therefore is expansionary, and firms exploit it to raise profit margins. Firms at the opposite tails of the distribution exhibit a substantially muted response. Our results hint that the shock lowers the cost of entering new markets, inducing some firms to bear larger fixed costs as part of their profit-maximizing strategy.

JEL-codes: L16 L25 L9 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-com, nep-eec and nep-ict
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