Digital Infrastructure, Regional Disparities, and Location Choices of Manufacturing Plants in the German Economy

Speaker:  Astrid Krenz, Ruhr University Bochum

Location: online or at Kiel Institute for the World Economy, Chausseestraße 111, 10115 Berlin

Organizers: Kiel Institute for the World Economy, CEPR

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Abstract: We analyse regional disparities in terms of the digital infrastructure in Germany, as well as the relevance of the availability and quality of digital infrastructure for the location choices of manufacturing plants in Germany. For that purpose, a novel and rich regional- and plant-level dataset based on official firm data (AFiD) from the Federal Statistical Office of Germany and the Statistical Offices of the Federal States is constructed. Regional disparities are found with regard to broadband access between urban and rural regions and between regions in the East and in the West of Germany. The results show that both the access and the speed of digital infrastructure matter for manufacturing plant location choices. We find that a 1 percent increase in the availability of broadband in a region increases the relative probability that a manufacturing plant chooses to locate in the region by about 0.4 percent. Differences occur between regions in the East and in the West of Germany.