The Nexus Between ICT Diffusion and Income Disparity: Insights from Post-soviet Economies

Abstract

The speed of adaption and integration of ICTs has particular implications for the distributional aspect of the economy. We investigate the dynamic impact of ICT diffusion on income inequality in post-Soviet countries. By applying a cross-sectional autoregressive distributed lag (CS-ARDL) approach, we analyze panel data due to cross-sectional dependency and mixed order of integration of our variables. Our empirical investigation reveals a statistically significant long-term relationship between the diffusion of ICTs and income inequality, characterizing it with a discernible negative trajectory. However, our analysis simultaneously reveals an insignificant impact of ICT diffusion on income inequality in the short term, indicating that individuals and businesses require time to develop the necessary skills and knowledge to utilize ICTs effectively. Furthermore, the study delineates the counterproductive income inequality in the former Soviet countries’ nature of governmental austerity measures vis-à-vis long-term income equality objectives, due to proportional or regressive taxation policies. Policy implications enclose the significance of designing policies that foster digital inclusion to reduce income inequality in post-Soviet countries.