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The Internet and Local Wages: A Puzzle

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  • Chris Forman
  • Avi Goldfarb
  • Shane Greenstein

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)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 1 (February)
Pages: 556-75

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:1:p:556-75

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  1. Erik Brynjolfsson & Lorin M. Hitt, 2003. "Computing Productivity: Firm-Level Evidence," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 793-808, November.
  2. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  3. Matthew J. Higgins & Daniel Levy & Andrew T. Young, 2006. "Growth and Convergence across the United States: Evidence from County-Level Data," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 671-681, November.
  4. Kevin J. Stiroh, 2002. "Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?," American Economic Review, American Economic Association, vol. 92(5), pages 1559-1576, December.
  5. David Autor & Frank Levy & Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  6. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2005. "Productivity, Volume 3: Information Technology and the American Growth Resurgence," MIT Press Books, The MIT Press, edition 1, volume 3, number 0262101114, December.
  7. Chris Forman & Avi Goldfarb & Shane Greenstein, 2008. "Understanding the Inputs into Innovation: Do Cities Substitute for Internal Firm Resources?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 295-316, 06.
  8. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, December.
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Citations

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Cited by:
  1. Greenstein, Shane & Nagle, Frank, 2014. "Digital dark matter and the economic contribution of Apache," Research Policy, Elsevier, vol. 43(4), pages 623-631.
  2. Falck, Oliver & Gold, Robert & Heblich, Stephan, 2012. "E-Lections: Voting Behavior and the Internet," Stirling Economics Discussion Papers 2012-07, University of Stirling, Division of Economics.
  3. Vinod Mishra & Russell Smyth, 2012. "Technological Change and Wages in China: Evidence From Matched Employer-Employee Data," Development Research Unit Working Paper Series 28-12, Monash University, Department of Economics.
  4. Bertschek, Irene & Cerquera, Daniel & Klein, Gordon J., 2013. "More bits - more bucks? Measuring the impact of broadband internet on firm performance," DICE Discussion Papers 86, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  5. Chris Forman & Nicolas van Zeebroeck, 2012. "From Wires to Partners: How the Internet Has Fostered R&D Collaborations Within Firms," Management Science, INFORMS, vol. 58(8), pages 1549-1568, August.
  6. Chris Forman & Avi Goldfarb & Shane Greenstein, 2014. "Information Technology and the Distribution of Inventive Activity," NBER Working Papers 20036, National Bureau of Economic Research, Inc.
  7. Akerman, Anders & Gaarder, Ingvil & Mogstad, Magne, 2013. "The Skill Complementarity of Broadband Internet," IZA Discussion Papers 7762, Institute for the Study of Labor (IZA).
  8. Hilal Atasoy, 2011. "IICT Skills and Employment Opportunities," Working Papers 11-24, NET Institute, revised Nov 2011.
  9. David Dranove & Christopher Forman & Avi Goldfarb & Shane Greenstein, 2012. "The Trillion Dollar Conundrum: Complementarities and Health Information Technology," NBER Working Papers 18281, National Bureau of Economic Research, Inc.
  10. Hilal Atasoy, 2011. "ICT Use and Labor: Firm-Level Evidence from Turkey," Working Papers 11-23, NET Institute, revised Nov 2011.
  11. Kim, Younjun & Orazem, Peter, 2012. "Broadband Internet and Firm Entry: Evidence from Rural Iowa," Staff General Research Papers 35696, Iowa State University, Department of Economics.
  12. Nadine Fabritz, 2013. "The Impact of Broadband on Economic Activity in Rural Areas: Evidence from German Municipalities," Ifo Working Paper Series Ifo Working Paper No. 166, Ifo Institute for Economic Research at the University of Munich.
  13. Jason Chan & Anindya Ghose & Robert Seamans, 2013. "The Internet and Hate Crime: Offline Spillovers from Online Access," Working Papers 13-02, NET Institute.

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