Virulent Word of Mouse

March 14, 2011

The Internet and Wage Inequality


What has the Internet Done for the Economy?

The puzzling spread of the commercial Internet could explain wage inequalities

It is hard to overstate how much the business world relies on the Internet. Powerhouse retailers like Target and Wal-Mart can simultaneously manage their changing inventories, warehouses, distribution routes, and sales. FedEx and UPS can code every shipment online so that customers can find out exactly where their packages are and what time they will arrive at their doors. Buying a wedding gift? Just pull up the couple’s online registry and browse the items that have not been purchased yet. Shopping for insurance? You can get quotes quickly via secure online chats with company representatives.

None of that was possible before 1995, when the large, government-controlled networks somewhat begrudgingly opened their lines for commercial use. Advanced Internet technologies spread rapidly in businesses across the country—in small cities, sprawling suburbs, and dense urban hubs. Although this sparked wage and employment spurts everywhere, the gains were far more striking in regions that were already well off, according to a study to appear in the American Economic Review….To read more, click here.

Kellogg Insight provides summary of research articles. This is a summary of “The Internet and Local Wages: A Puzzle,” by Avi Goldfarb, Chris Forman and Shane Greenstein. For more about this topic on this blog see “Will the iPad Flatten us all?”

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