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  3. American Economic Review
  4. February 2012
  5. The Internet and Local Wages: A Puzzle

The Internet and Local Wages: A Puzzle

  • Chris Forman
  • Avi Goldfarb
  • Shane Greenstein
American Economic Review
vol. 102, no. 1, February 2012
(pp. 556-75)
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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)

Citation

Forman, Chris, Avi Goldfarb, and Shane Greenstein. 2012. "The Internet and Local Wages: A Puzzle." American Economic Review, 102 (1): 556-75. DOI: 10.1257/aer.102.1.556

Additional Materials

JEL Classification

  • J31 Wage Level and Structure; Wage Differentials
  • L86 Information and Internet Services; Computer Software
  • O33 Technological Change: Choices and Consequences; Diffusion Processes
  • R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
  • R23 Urban, Rural, Regional, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics