# **1. Introduction**

A growing body of literature has documented the impacts of internet access on a host of economic outcomes.<sup>1</sup> Some empirical evidence suggests that the internet—like other skill-biased technological innovations—tends to benefit more educated workers but may lead to displacement effects among their less educated peers. This mechanism has often been cited to explain why poverty reduction has been sluggish among the least developed areas of the world despite significant improvements in internet connectivity.<sup>2</sup> On the other hand, more recent evidence has shown that the internet has enabled faster job creation and increased economic activity in Africa, as well as higher productivity and export growth among firms in Africa (Hjort and Paulsen, 2019). However, little is known about the effects of the internet on household and individual welfare, especially among the poorest populations.

In this paper, we provide new evidence on the impacts of mobile broadband coverage on household consumption and poverty in Nigeria, the largest economy and mobile broadband market in Africa. Using a difference-in-difference strategy, we exploit a unique data set that integrates three waves of a nationally representative longitudinal household survey on living standards—the General Household Survey or GHS—with information from Nigerian mobile operators on the deployment of mobile broadband coverage during the 2010-2016 period. The data allow us to match the location of each household with the coverage provided by each mobile site, to determine with precision the time when individual households began receiving coverage. Individual coverage of mobile broadband is defined as the provision of 3G or 4G coverage, which enables high-speed access to the internet, and excludes 2G coverage as it only provides for limited internet browsing and applications.

We find that mobile broadband coverage had large and positive impacts on household consumption levels. Households that had at least one year of mobile broadband coverage experienced an increase in total consumption of about 6 percent. These effects increase over time, though at a decreasing rate. Coverage also reduces the proportion of households below the poverty line by about 4.3 percentage points for extreme poverty and 2.6 percentage points for moderate poverty after one year of gaining mobile broadband coverage. Moreover, the gains on total and food consumption are progressive, since they tend to be larger for initially poorer rural households.

We also explore some of the underlying mechanisms through which mobile broadband coverage can enhance welfare, including employment and prices. We find that improvements in labor market outcomes contribute to the increase in consumption by raising the purchasing power of households. Households in areas covered by mobile broadband internet witnessed an increase in labor force participation and wage employment of about 3.3 and 1.4 percentage points respectively, with these effects materializing three or more years after being covered.

A potential concern regarding the difference-in-difference strategy is that mobile broadband coverage is not rolled out randomly, since operators tend to target more prosperous areas first, which in turn are likely to have higher consumption levels and lower poverty rates. However, when comparing preexisting trends in key variables between covered and uncovered areas, we find that the differences are

> 1 See Bertschek et al. (2017) for a comprehensive review of the literature.

> 2 For example, World Bank World Development report “Digital Dividends” (2016) argues that without complementary policies (such as in education, business environment, etc.), many benefits of the internet may go unrealized and inequality may increase.

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