Internet, inequality and growth

This paper provides new findings about the impacts of Internet adoption and the income inequality on economic growth. Analytical insights are suggested within a framework of a pure-exchange overlapping generations model. A panel data set for 60 countries for the period 1995–2002 has been assembled to test the analytical investigations. The panel estimation shows that the implied effect of Internet adoption on growth is negative for countries with high income inequality because the digital divide hinders economic growth incurred by the Internet. From a policy standpoint, this result implies that the positive impact of Internet on growth will be reinforced by the income redistribution.