American Economic Review Vol. 102 No. 1 2012

The Internet and Local Wages: A Puzzle

Chris Forman¹; Avi Goldfarb²; Shane Greenstein³

¹ College of Management, Georgia Institute of Technology, 800 West Peachtree Street NW, Atlanta, GA 30308. · ² Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, ON M5S 3E6. · ³ Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208.

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

DOI

10.1257/aer.102.1.556

Volume

102

Issue

1

Pages

556-575

Language

en

Sources

crossref openalex bibtex:phds-export.bib

Cite

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