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

By Banu Demir, Beata Javorcik  and Piyush Panigrahi

This paper examines how high-speed internet access affects economic activity by analysing Turkey's rollout of fiber-optic networks during 2012-2019. Using detailed data on firm-to-firm transactions, the authors find that better internet connectivity led firms to source more inputs from regions with better connectivity, work with a larger number of suppliers, and distribute their purchases more evenly across suppliers. The paper also shows that improved internet infrastructure increased real income by 2.2% in the median Turkish province through two channels: reduced costs of finding information about potential suppliers and lower costs of communicating and coordinating with such suppliers.

These findings have several operational implications. A first one is that investment in digital infrastructure can yield significant economic returns by enabling firms to build more diverse and resilient supply chains. Any impact measurements of these returns should consider both the direct effects of connectivity improvements and the indirect benefits through enhanced business relationships and supply chain optimization. Finally, comprehensive coverage should be prioritized over just connecting major business centers, as the benefits are particularly strong for firms in smaller and more remote regions.