The Internet and Local Wages: Convergence or Divergence?

Chris Forman, Avi Goldfarb, Shane Greenstein

NBER Working Paper No. 14750
Issued in February 2009, Revised in December 2011
NBER Program(s):Productivity, Innovation, and Entrepreneurship

How did the diffusion of the internet affect regional wage inequality? We examine the relationship between business use of advanced internet technology and local variation in US wage growth between 1995 and 2000. We find no evidence that the internet contributed to regional wage convergence. Advanced internet technology is associated with larger wage growth in places that were already well off. These are places with highly educated and large urban populations, and concentration of IT-intensive industry. Overall, advanced internet explains over half of the difference in wage growth between these counties and all others.

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Acknowledgments

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Document Object Identifier (DOI): 10.3386/w14750

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