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Internet (Power) to the People: How to Bridge the Digital Divide

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  • Hidalgo, Julian
  • Sovinsky, Michelle

Abstract

Due to global lockdowns driven by the COVID-19 pandemic, the pervasiveness of inequalities in digital access is more salient. As a result, finding strategies to narrow the digital divide has moved to the forefront of public policy. We examine the impact of a pricing subsidy in Colombia to learn about what hinders low-income populations from adopting internet services. Our model allows take-up to depend on the types of plans offered as well as the rate of diffusion in the neighborhood. We find that increasing the diffusion rate (via internet literacy programs) is more beneficial to takeup among households in the lowest socioeconomic markets and in less technically savvy markets relative to a pricing subsidy. Pricing subsidies reduce the digital divide by 13% points but over half of that is due to the impact on the diffusion rate. Our results suggest that non-price policies are equally important to bridge the digital divide.

Suggested Citation

  • Hidalgo, Julian & Sovinsky, Michelle, 2023. "Internet (Power) to the People: How to Bridge the Digital Divide," CEPR Discussion Papers 18354, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18354
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    More about this item

    Keywords

    Digital Divide; Network effects; Internet diffusion; Limited choice sets; Data restrictions; Discrete choice model; Price subsidies;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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