ICT and capital biased technical change

Historical analysis of past general purpose technologies suggest that multi-factor productivity gains are realised through both labor and capital saving features from these technologies. In this paper, we explore for the first time whether ICT leads to capital saving, generated by squeezing a greater amount of economic activity into a smaller amount of space. To do so we use new regional data on building capital for the UK and cross-space and time variation in broadband connection speeds over an 18 year period. We find evidence of capital biased technical change, where the long-term effects of ICTs are linked to a reduction of the geographic footprint of businesses and these results are robust to wide-ranging robustness, falsification and endogeneity bias tests. The capital biased technical change effects of ICT provide a new perspective on the recent discussion about the ‘death of the high street’ and, as this type of capital is typically assumed to be constant, likely represents an aspect of TFP missing from estimates constructed at both the micro and macro level