How Important is Mobile Broadband Latency for Total Factor Productivity Growth?

This paper investigates the relationship between the log change in mobile broadband latency and total factor productivity (TFP) growth based on data for 130 countries. It finds that there is a strong negative correlation between TFP growth and one year lag of latency growth in OECD countries. The interpretation of the findings is that a 10 percentage points decrease in the growth of latency in period t-1 is associated with an increase of 0.3 percentage points in TFP growth. The findings are in accordance with the framework of General Purpose Technologies that suggests that the impact of new technologies often appear with a lag. Moreover, no relationship is found for the total sample or for non-OECD countries. One possible explanation could be that OECD countries have reached a higher maturity in digitalisation and automation in production processes and thus are able to take advantage of the benefits of lower latency.