Investigating the influence of internet usage on income inequality in transitional countries

  • Kunofiwa Tsaurai University of South Africa
  • Bester Chimbo
Keywords: Internet; Income Inequality; Transitional Economies; Panel Data Analysis

Abstract

The study investigated the impact of internet usage on income inequality in transitional economies using panel data ranging from 2008 to 2019. The second objective was to find out the influence of the complementarity between internet usage and human capital development on income inequality in transitional economies using the same data set. The available literature on the subject matter is divergent, conflicting, and far from reaching a consensus, hence the reason why the author attempted to empirically investigate the impact of internet usage on income inequality. The lag of income inequality was found to have had a significant positive influence on income inequality under the dynamic generalized methods of moments (GMM). Fixed effects produced results which show that internet usage had a significant negative effect on income inequality, consistent with the available literature. Transitional economies are therefore urged to develop and implement policies that promotes a wide coverage of internet usage to reduce income inequality. The interaction between internet usage and human capital development was found to have had a significant positive impact on income inequality under the fixed effects whilst pooled ordinary least squares (OLS) shows that the impact of the complementarity between internet usage and human capital development on income inequality was negative but significant. Transitional economies are therefore urged to implement enhanced human capital development policies to enable internet usage to play a meaningful role in reducing income inequality in the society. Future research needs to establish minimum threshold levels that internet usage in transitional economies must reach to have a significant influence on income inequality. Such a study enriches the income inequality policy making and implementation programmes.

References

1. Afzal, M. Malik, M. E. Begum, I. Sarwar, K. and Fatima, H. (2010). Relationship among education, poverty and economic growth in Pakistan: An Econometric analysis, Journal of Elementary Education, 22(1), 23-45.
2. Amin, S. (1974). Accumulation on a world scale: A critique of the theory of underdevelopment. New York: Monthly Review Press.
3. Ahamad, T. and Pandery, J.K. (2014). A study on application and role of ICT in rural development. Journal of Emerging Technologies and Innovative Research, 1 (6), 455-458.
4. Asongu, S. and Odhiambo, N. (2019). How Enhancing Information and Communication Technology has affected Inequality in Africa for Sustainable Development: An Empirical Investigation. Sustainable Development. 27. 647-656. 10.1002/sd.1929.
5. Aye, G. C. and Edoja, P. E. (2017). Effect of economic growth on C02 emission in developing countries: Evidence from a dynamic panel threshold model. Cogent Economics and Finance, 5 (1), 1-22.
6. Azher, B.A. (1995). Rural savings: Their magnitude, determinants and mobilization, Pakistan Development Review, 34(4), 779-786.
7. Bauer, J. (2015). Internet Connectivity and Income Inequality. Paper presented at the 27th Annual Meeting of Society for the Advancement of Socioeconomics, London, England.
8. Bello, O.O. and Aderbigbe, F.M. (2014). The role of ICT in national development and poverty alleviation. International Journal of Research in Engineering and Technology, 2 (5), 275-284.
9. Brown, J. R. and Goolsbee, A. (2002). Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry. Journal of Political Economy 110, 481-507.
10. Canh, N. P. Schinckus, C. Thanh, S.H. and Ling, F.C. H. (2020). Effects of the internet, mobile and land phones on income inequality and the Kuznets curve: Cross country analysis. Telecommunications Policy, 44 (10), 1-15.
11. Chaudhry, I. S. and Rahman, S. (2009). The impact of gender inequality in education on rural poverty in Pakistan: An empirical analysis, European Journal of Economics, Finance and Administrative Sciences, 15, 174-188.
12. Chiou, L. and Tucker, C. (2020). Social Distancing, Internet Access and Inequality. Working Paper 26982, http://www.nber.org/papers/w26982
13. Diga, K. Nwaiwu, F. and Plantinga, P. (2013). ICT policy and poverty reduction in Africa. Emerald Group Publishing, 15 (5), 114-127.
14. Garcia-Mora, F. and Mora-Rivera, J. (2021). Exploring the impacts of internet access on poverty: A regional analysis of rural Mexico. New Media and Society, 1-25.
15. Hargittai, E. (1999). Weaving the Western Web: Explaining Differences in Internet Connectivity Among OECD Countries. Telecommunications policy, 23, 701-718.
16. Houngbonon, G. V. and Liang, J. (2018). Broadband Internet and Income Inequality. Social Science Research Network, No. 2963860.
17. Howard, P. N. Busch, L. and Sheets, P. (2010). Comparing Digitai Divides: Internet Access and Social Inequality in Canada and the United States. Canadian Journal of Communication, 35, 109-121.
18. Im, K. S. Pesaran, M. H. and Shin, Y. (2003). Testing unit roots in heterogeneous panels. Journal of Econometrics, 115 (1), 53-74.
19. Isife, B. I. Nnodim, A. U. and Albert, C. O. (2013). The role of ICT in poverty alleviation among rural farmers in Abia State. Computer Engineering and Intelligent Systems, 4 (7), 20-24.
20. Kao, C. (1999). Spurious regression and residual-based tests for co-integration in panel data, Journal of Econometrics, 90 (1999), 247-259.
21. Levin, A. Lin, C. F. and Chu, C. S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108 (1), 1-24.
22. Litan, R. E. and Rivlin, A. M. (2001). Projecting the economic impact of the internet. American Economic Review 91, 313-317.
23. Liu, Y. (2017). Internet and income inequality: A research note. International Center for Public Policy Working Paper Series, 17-23, December 2017.
24. Mora-Rivera, J. and Garcia-Mora, F. (2021). Internet access and poverty reduction: Evidence from rural and urban Mexico. Telecommunications Policy, 45 (2), 1-22.
25. Mogotlhwane, T. M. Talib, M. and Mokwena, M. (2011). Role of ICT in reduction of poverty in developing countries: Botswana as an evidence in SADC region. International Journal of Computing and ICT Research, 5 (1), 53-64.
26. Nguyen, T. P. H. (2003). Contribution of foreign direct investment to poverty reduction: The case of Vietnam in the 1990S, In: Michael Frenkel and Georg Stadtmann (eds): Foreign direct investment: Theory, Empirical Evidence and Policy Implications, Verlag fuer Wissenchaft Un.
27. Ningsih, Caria; Choi, Yong-Jae (2018). An Effect of Internet Penetration on Income Inequality in Southeast Asian Countries, 22nd Biennial Conference of the International Telecommunications Society (ITS): "Beyond the Boundaries: Challenges for Business, Policy and Society", Seoul, Korea, 24th-27th June, 2018, International Telecommunications Society (ITS), Calgary.
28. Noh, Y.-H. & Yoo, K. (2008). Internet, inequality and growth. Journal of Policy Modeling. 30. 1005-1016. 10.1016/j.jpolmod.2007.06.016.
29. Panichsombat, R. (2016). Impact of Internet Penetration on Income Inequality in Developing Asia: An Econometric Analysis. ASR: CMU Journal of Social Sciences and Humanities, 3(2), 151-167.
30. Pepper, R. and Garrithy, J. (2015). ICTs, Income Inequality, and Ensuring Inclusive Growth. The Global Information Technology Report 2015, 31-38.
31. Postula, M. Chmielewski, W. Puczynski, P. and Cieslik, R. (2021). Impact of information and communication technologies on energy poverty and unemployment in selected European Union Countries. Energies, 14, 1-18.
32. Okello, G. Adhiambo, M. Martin, K. and Ouma, E. (2014). The role of ICT in economic growth and poverty reduction. International Journal of Arts and Commerce, 3 (3), 35-48.
33. Owusu, E. L. and Odhiambo, N. M. (2014). Financial liberalization and economic growth in Nigeria. An ARDL-bounds testing approach. Journal of Economic Policy Reform, 17 (2), 164-177.
34. Pradhan, B. K. and Mahesh, M. (2014). Impact of trade openness on poverty: A panel data analysis of a set of developing countries, Economic Bulletin, 34(4), 2208-2219.
35. Rewilak, J. (2017). The role of financial development in poverty reduction, Review of Development Finance, 7 (2), 169-176.
36. Stead, R. (1996). Foundation quantitative methods for business. Prentice Hall. England.
37. Stiglitz, J. (1998). The role of the state in financial markets. In: World Bank Annual Conference on Development Economics, 19-52.
38. UNCTAD (2012). World Investment Report. New York: United Nations.
39. Urama, N. E. and Oduh, M. O. (2012). Impact of developments in telecommunications on poverty in Nigeria, Journal of Economics and Sustainable Development, 3 (6), 25-34.
40. Yang, L. Lu, H. Wang, S. and Li, M. (2021). Mobile internet use and multidimensional poverty: Evidence from a household survey in rural China, Social Indicator Research, doi: 10.1007/s11205-021-02736-1.
41. Yilmaz, R. and Koyuncu, J.Y. (2018). The contribution of ICT to poverty reduction: A panel data evidence, Social Sciences Research Journal, 7 (4), 2147-5237.
42. Zhang, J. Zhang, Y. Cheng, M. Yu, N. Wei, X. and Zhang, Z. (2019). Impact of information access on poverty alleviation effectiveness: Evidence from China, Digital Object Identifier, doi: 10.1109/Access. 2019. 2946652.
43. Zhang, S. Li, F. Xiao, J. J. (2020). Internet Penetration and Consumption Inequality in China. International Journal of Consumer Studies, DOI: 10.1111/ijcs.12575
Published
2021-11-01
Section
Articles