American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access
American Economic Journal: Microeconomics
(pp. 399–431)
Abstract
Government infrastructure investment may crowd out investment from private firms or induce them to invest preemptively. The tension between these effects underlies the policy debate over municipal provision of internet access. I estimate demand for broadband and combine these results with a dynamic oligopoly model of private and public firms' entry and investment decisions. I simulate a ban on public entry and find that municipalities crowd out more private fiber-optic investment than they induce through preemption. I estimate that this ban decreases consumer surplus and municipal profits by $27 billion while increasing private profits by $23 billion over ten years.Citation
Wilson, Kyle. 2025. "Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access." American Economic Journal: Microeconomics 17 (4): 399–431. DOI: 10.1257/mic.20210110Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- H44 Publicly Provided Goods: Mixed Markets
- H57 National Government Expenditures and Related Policies: Procurement
- L33 Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out
- L96 Telecommunications