Working Paper: NBER ID: w16166
Authors: Shane Greenstein; Ryan C. McDevitt
Abstract: In this paper, we construct a price index for broadband services in the United States between 2004 and 2009. We analyze over 1500 service contracts offered by DSL and cable providers in the United States. We employ a mix of matched-model methods and hedonic price index estimations to adjust for qualitative improvements. In general, we find some evidence of a quality-adjusted price decline, but the evidence points towards a modest decline at most. Our estimates of the price decline range from 3% to 10% in quality-adjusted terms for the five-year period, which is faster than the BLS estimates for the last three years. These modest price declines look nothing like other parts of electronics, such as computers or integrated circuits, which raises many questions. The results also inform a range of policy discussions about US broadband services.
Keywords: Broadband; Price Index; Hedonic Pricing; Quality Adjustment
JEL Codes: L86; O33; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| price index for broadband services (L96) | BLS index for internet access (L86) |
| price of broadband services (L96) | quality-adjusted price index (C43) |
| quality adjustments (L15) | price indices (C43) |
| quality-adjusted price index (C43) | price of broadband services (L96) |