The Impact of Unequal Access to the Internet on Earnings: A Cross-Sectional Analysis

The computer has transformed the way that information is spread, as well as the way that it is processed and generated. The Internet provides a huge amount of information in a cost-efficient way, and has become a main channel for gaining information. This study addresses an economic consequence of the rapid spread of information via the Internet. Given that economic rationality and utility maximization rely on agents' information set, the access to the Internet may result in information asymmetry between users and non-users, which affects utility maximization. Analyzing the CPS data, this study finds that, controlling for occupational status, education, and other variables, Internet access influences one's utility maximization, measured as hourly earnings. More specifically, information-seeking activity, but not Internet access itself, produces differences in earnings. It is also found that the characteristics of Internet users correlate with the main factors of stratification, such as race/ethnicity, education, and occupation. This finding implies that information revolution, informatization, or the information society, whatever one calls it, follows a long prevailing split between haves and have-nots, and may have exacerbated old inequalities in new ways.