The Internet and Local Wages: A Puzzle
Chris Forman, Avi Goldfarb, Shane Greenstein
American Economic Review · 2012 · Volume 102 · Issue 1
Abstract
How did the diffusion of the internet affect regional wage inequality? We examine the relationship between business investment in advanced internet technology and local variation in US wage growth between 1995 and 2000. We identify a puzzle. The internet is widespread, but the economic payoffs are not. Advanced internet technology is only associated with substantial wage growth in the 6 percent of counties that were already highly wealthy, educated, and populated and had IT-intensive industry. Advanced internet and wage growth appear unrelated elsewhere. Overall, advanced internet explains over half the difference in wage growth between already well-off counties and all others. (JEL J31, L86, O33, R11, R23)
Keywords
Wage Level and Structure, Wage Differentials, Information and Internet Services, Computer Software, Technological Change: Choices and Consequences, Diffusion Processes, Regional Economic Activity: Growth, Development, Environmental Issues, and Changes, Urban, Rural, Regional, and Transportation Economics: Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics
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