Advanced digital technologies and firm-level employment outcomes

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 data set 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 a rich administrative matched employer-employee balanced data set 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 overall firm-level employment. When considering different categories of workers, by job contract type and the skill content of jobs, as well as the technological intensity of firms, we detect substantially differentiated UBB effects. We find complementarity effects of UBB with high-level jobs, particularly in
the high-tech sector. Moreover, only for low-tech firms, we document a substitution effect of UBB with qualified blue-collar jobs.