Internet use at work and income inequality in Ecuador

Abstract

This study examines the impact of technological advancements, particularly Internet access, on labor income inequality. The Internet is a versatile technology with wide-ranging applications. We argue that in environments characterized by limited innovation and a polarized job market, Internet access can positively influence worker income, especially for those in lower income brackets. Our research conducted in Ecuador from 2010 to 2017 employs instrumental variable quantile regression to analyze how Internet access affects wages across various income levels. Our findings indicate that using the Internet at work correlates with higher wages in Ecuador, particularly benefiting workers in the higher quantiles of the income distribution. While the income gap between employees with and without Internet access is largest in the lowest quantile, it decreases in the second quantile and widens again in the third, but never surpasses the gap observed in the first quantile. Public policy should thus provide citizens, particularly in the lowest income deciles, with education on effective Internet usage to improve their conditions and reduce inequality. By concentrating on these groups, we can better distribute the advantages of Internet access, ultimately creating a more balanced and equitable society.