Broadband Internet and Income Inequality

Abstract

A burgeoning literature has emphasized the effects of ICT on job polarization, but there is still a lack of evidence about its impact on income distribution. In this paper, we augment income distribution and labor market data with detailed broadband data from France to investigate the impact of broadband infrastructure on income inequality. Using a two-stage instrumental variable estimator with a logistic diffusion model at the first-stage, we find that income inequality falls with the diffusion of broadband infrastructure. More precisely, we find that a 10-percentage-point increase in broadband penetration lowers the Gini coefficient by 0.34 percentage point. Further empirical analyses suggest that this effect stems from a growth of low-skill service jobs. It is greater in less densely populated areas, and become significant as the penetration rate of broadband infrastructure rises above 28%.