Colombia showed a significant increase in fixed broadband penetration. The growth level was almost three times the level of the OECD average and near one and a half times the growth level displayed by Chile. This shows that at the household level, Colombia may still have room to expand its broadband penetration. At the business level, the story is quite different. In 2003, 86% of small and medium size enterprises (SME) and 96% of large ones had internet access (CINTEL) (2003). In 2015, 99% of firms in manufacturing and 99.7% in retail and services used internet (CRC) (2015). This shows that internet access in the last decade has been relatively high in Colombia’s business sector.

This high coverage of internet access poses the challenge of identifying the gains in productivity due to the availability of internet and how it relates to labor demand; I therefore focus on a slightly different question. In the next section, I explore the literature and conclude that the focus, rather than being on internet access per se, should be on high‐speed broadband internet access for firms.

The second section discusses the relevant literature that is related to this paper. The third describes the data used in this analysis. The forth section discusses the results of the ICT module in the Annual Manufacturing Survey for the years 2008‐2014. The fifth section discusses the TFP estimation procedure. The sixth section presents the main results of the paper in terms of the effect of TFP gains due to ICT use on labor demand and wages. The sixth section shows robustness and falsification exercises. The final section concludes with a discussion of the results.

# Literature review

This paper is related to two different branches of the economics literature. The first branch studies the impact of broadband internet and firm productivity ((Fabling, Grimes, & Grimes, 2016). The second branch focuses on the estimation of production functions and total factor productivity. The first contribution of the paper is adding to the scarce empirical evidence about the labor demand predictions of task‐based models of technological change for heterogeneous firms in developing countries, with a special focus on broadband internet. The second one is estimating total factor productivity within the framework of proxy method models of production function estimation proposed by De Loecker and Warzynski (2012) and De Loecker (2013). The innovation is modeling a total factor productivity law of motion that explicitly considers the past adoption of high‐speed broadband internet as a shifter in growth levels. I now discuss each branch of the literature and put the paper’s contribution in context within each one.

The paper’s theoretical underpinnings follow Brambilla (2018). Her model predicts that because of ICT adoption, firms will grow, pay higher wages, become specialized in complex tasks and more skill intensive conditional on skilled labor and ICT being complements. Brambilla (2018) expands traditional task‐based models of technical progress and labor markets to allow firm heterogeneity and wage heterogeneity across firms. In this paper, ICT adoption will be modeled as the adoption of high‐speed broadband internet. Akerman et al. (2015) provide evidence of the skill complementarity of broadband internet adoption. Related to this point, there is also a growing literature about the effect of broadband internet on firm productivity ((Bertschek, Cerquera, & Klein, 2013; Colombo, 3