Is Inequality Harmful for Broadband Diffusion and Economic Growth?

Abstract

Article History Keywords Economic growth Inequality Broadband Digital divide ICT Human capital. JEL Classification D63, O33, O47. Some say that the digital gap adds new inequalities to the economic and social inequalities and help amplify them. However, others think that this gap is simply the effect of the existing social and economic inequalities. Although the first opinion has been studied by a fair number of empirical studies, the second has not had much luck in the existing literature. In this work, we try to examine the impact of inequality on the proliferation of broadband Internet and on the change of its relationship with economic growth. The implementation of two empirical models on panel data for 19 countries covering the 2000-2012 period identified two main original results. The positive impact of broadband on economic growth is reduced by the digital divide, which strengthened by the presence of income inequality and hampers economic growth. The second model emphasizes the blocking effect that income inequality could have on broadband proliferation. Contribution/ Originality: This study is one of very few studies which have investigated the trilateral relationship between broadband (and ICT in general) inequality and growth, and allows studying the inverse relationship between broadband and inequality (i.e. how inequality affects the broadband proliferation).