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Digital technology and regional income inequality: are better institutions the solution?

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  • Antonietti, Roberto
  • Burlina, Chiara
  • Rodriguez-Pose, Andres

Abstract

In this paper, we examine the effect of regional digital technology (including computing, communication equipment, software, and databases) on income distribution at the regional level. We aim to fill a gap in existing research by exploring the moderating role of formal and informal institutions —such as bonding and bridging social capital— in shaping how digital technology affects income inequality across European NUTS2 regions from 2006 to 2016. The results indicate that regions with greater access to digital technology are prone to higher levels of income inequality. However, this negative link is mitigated by strong formal and informal institutions, particularly through improved government effectiveness and bridging social capital. The findings are robust to potential endogeneity concerns, as demonstrated by the instrumental variable approach adopted.

Suggested Citation

  • Antonietti, Roberto & Burlina, Chiara & Rodriguez-Pose, Andres, 2025. "Digital technology and regional income inequality: are better institutions the solution?," LSE Research Online Documents on Economics 127062, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:127062
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    More about this item

    Keywords

    digital technology; institutions; inequalities; European regions;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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