metropolitan area, (two‐digit) industry of economic activity and year respectively. Finally, the vector X captures variables which are theoretically related to labor demand. I have included the lagged value of capital and the minimum wage (which is interacted with the share of unskilled labor in industry total employment). All standard errors were two‐way clustered at the state and plant level. The period of analysis is 2008‐2014 given that information on broadband use is only available for this time frame. The estimation sample is restricted to firms that report a consistent industry code during the sample period and therefore the vector of coefficients Β� will not be identified separately form the fixed effect.

The adoption of broadband services may be correlated with unobserved factors, such as the availability of service providers at the plant’s location or the costs of internet services. Under this assumption coefficient �� will be inconsistent to identify the effect of broadband adoption. I instrument broadband use with an interaction of log broadband speeds available for businesses at the state level and the industry average broadband use through broadband technology in the previous year. Therefore, the estimation will pick up the effect of broadband use which can be explained by the variation in broadband speed availability at the industry‐state level. Broadband speed is defined as the download internet speeds weighted by the number of subscriptions each internet service provider reported in each state from 2008 to 2014.

The identification of the effect of broadband use due to broadband service quality use on labor demand relies on the relevance and exclusion restrictions being satisfied by the instrument. The instrument was constructed as the product of two variables: 1‐The average use of broadband at the (three‐digit) industry level in the previous year.<sup>5</sup> 2‐The (weighted<sup>6</sup> ) average download speeds at the state level. The first part of the instruments is relevant since it captures the degree of broadband use in each industry. As Table 15 shows, there are statistically significant differences in labor market variables depending on whether firms belong to an industry where broadband is more intensively used. The second part of the instruments is relevant as it captures a precise definition of broadband internet quality, it is download speeds in the state where the production unit is located.<sup>7</sup> The exclusion restriction of the instrument is given by the fact that the average, three‐digit industry broadband use is predetermined each period. The second part of the instrument exploits the fact that internet quality to businesses is determined by the service provider infrastructure and should only affect labor demand through its effects on broadband adoption and use and not directly. Figure 3 suggests that between 2008 and 2014 the average internet speed increased in Colombia. By 2008 only the darkest areas had internet speeds above 2mbs, while by 2014 some of the white areas had broadband coverage. However, this increase has not radically changed the areas where the highest broadband speeds were available. The Appendix shows the broadband speed information for every

> 5 Recall that in the analysis I include industry dummies at the two‐digit level, so this is a finer measure of industry that is still larger than the firm level.

> 6 The average is weighted by the number of subscriptions each Internet Service Provider has.

> 7 The state level may still be too broad a measure of broadband availability. However, the data provided to us for this research project by Colombia’s national statistics agency did not include a finer geographical identification variable due to data confidentiality concerns.

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