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A study by Prognos AG on behalf of the Vodafone Institute shows the effects of network expansion on the economy, innovation and research in Germany.
Inflation, high energy costs and a decline in consumption are putting the brakes on the German economy. Gross domestic product may have shown surprising, though weak, growth between July and September of this year – with an uptick of 0.3 percent. But experts expect that the economy will shrink this winter. Recovery requires constants that can make a positive contribution to gross domestic product even in the midst of crisis. One of those constants is network expansion, which is continuing apace and has already had a significant effect on the economy in the past: At an average of more than 5 billion euros per year, network expansion contributes almost twice as much to German GDP growth as the mechanical engineering sector. Around 5 percent of annual economic growth during the study period can be attributed to network expansion.
The independent study performed by Prognos AG analyses network expansion in Germany and quantifies the downstream effects on employment, ideas and economic success – nationwide and regionally. Notably, in recent years, smaller and mid-sized cities have benefited more strongly than average from network expansion. Gross employee salaries in rural areas, for example, rose by an average of 37 euros per year as a consequence of network expansion. By comparison: The nationwide average is an increase of 32 euros. The Innovation Index found that cities and rural districts in Bavaria came out on top. First place, though, was secured by the city of Jena in Thuringia, population 110,000.
For Dr. Georg Klose, head of digital development at Prognos, the study confirms what has long been surmised: “Fast internet is a key building block for Germany’s economic and innovative success.” Christina Arens, head of the Vodafone Institute, says: “Particularly in times of instability, constants that can contribute to the stabilisation of the economy are especially important. Network expansion can make a significant contribution. The Innovation Index shows that each additional megabyte per second makes a positive contribution to gross domestic product. Not just in the metropolises, but especially in small and mid-sized cities.”
Positive Effects on Scientific Research
In addition to the economy, scientific research also benefits from expansion of network infrastructure: Over 1,000 additional publications and almost 1,000 additional patents in the technology sector per year during the study period can be traced back to the improved digital parameters. Continuing network expansion is also an important factor for highly qualified workers, students and experts in the research and development sector. An increase of around 7,100 university students per year is linked to network expansion in university cities in Germany. Around 16 percent of the increase in university students during the study period can thus be attributed to network expansion.
This is how noticeable 10 megabits per second is
In addition to the annual effects of network expansion, the experts from Prognos also analysed how significant the effect is of an extra 10 megabytes-per-second on the economy and innovation. During the study period, each additional 10 megabytes-per-second produced an additional 4.6 billion euros of gross domestic product and 25,000 new business registrations.
Methodology
The Germany Innovation Index conducted by Prognos is based on a time and regional comparison of German districts and cities between 2010 and 2019. In that comparison, changes in economic and innovation indicators are explained by changes in the degree of network expansion. An econometric analysis with a panel dataset yields a robust estimate of the average correlation between network expansion and economic and innovation indicators across all years and geographic locations. To present the results, districts were grouped according to the size and profile of the network expansion effect, whereupon the districts were divided into seven different groups (clusters) with different overall effect sizes. The average effect strength decreases from cluster 1 (largest effect) to cluster 7 (smallest effect).
