Geographic and Network Neighbors: Spillover Effects of Telecommunications Infrastructure

This paper tests for spatial spillover effects of state‐level telecommunications infrastructure investment on state output, using panel data for 48 U.S. states from 1970 through 1997. As information and communication technologies support more industrial locational freedom, states may use telecommunications infrastructure investment as a competitive tool for attracting factors of production. In a production‐function framework, this effect would manifest itself as a negative output spillover effect from telecommunications infrastructure investment. Findings indicate that a state benefits from its own telecommunications infrastructure, but telecommunications investment by other states has a negative impact on its output growth path, and proximity amplifies this negative spillover effect.