Mobile Access Expansion and Price Information Diffusion : Firm Performance after Ethiopia’s Transition to 3G in 2008
This paper investigates whether enhanced access to mobile communications, including internet, primarily through smart phones, increases competition as price information is more widely available to customers—both households and firms. The exogenous...
| Main Authors: | , , , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/230161629725057008/Mobile-Access-Expansion-and-Price-Information-Diffusion-Firm-Performance-after-Ethiopia-s-Transition-to-3G-in-2008 http://hdl.handle.net/10986/36194 |
| Summary: | This paper investigates whether enhanced
access to mobile communications, including internet,
primarily through smart phones, increases competition as
price information is more widely available to customers—both
households and firms. The exogenous shock to identify these
impacts is the transition from 2G to the 3G broadband
network standard in 2008, and the induced changes in the
geographic variation across districts of data plan
availability for households. The operational mechanism is
that better household and firm telecommunications access can
close information asymmetry gaps between buyers and sellers,
with increased competition leading to improved firm
performance. Lower markups and reduced price dispersion can
result from better incentives for firms to preserve and grow
market share. And as price competition squeezes profit
margins, there are more incentives for firms to reduce
costs—inducing higher total factor productivity growth.
Improved firm performance can generate jobs and economic
transformation. Indeed, faster productivity growth, due to
enhanced access for buyers to mobile telecommunications, can
translate into higher formal employment and wages. One open
question is whether the potential competition, driven by the
increased mobile telecommunications access of buyers, which
help them have the best alternative prices at their
fingertips, will also impact export-oriented companies. The
prior is that the firm performance improvement effect would
be more salient for firms mostly focused on local markets.
The primary data sources are manufacturing firm census data
and household expenditure survey data across woredas
(districts or counties) in Ethiopia. First, the paper
investigates the relation between expanded access with the
3G network to price information through mobile phones
(measured at the woreda level as share of households with
substantive expenditure to access data through smartphones)
and firm performance measures (markups, total factor
productivity, labor productivity, wage growth, wage gaps and
employment growth.), across districts with different shares
of mobile telecommunication and data plan penetration
subscription. The paper estimates models with
difference-in-differences and triple differences. The
evidence is consistent with competition intensification
after the improvement in access to mobile communication due
to the 3G network rollout. In particular, markups were
reduced and there was higher growth in productivity, wages,
and employment. |
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