ZEF Discussion Papers on Devlopment Policy 7

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Concluding remarks:
Notwithstanding the shortcomings of the data and the questionable
assumptions underlying some of the studies reviewed here (especially those that use data from
developing countries), the message that emerges from these results seems unequivocal.
Regardless of the method used to calculate consumer surplus, the welfare effects associated with
the spread and use of these technologies are substantial. On the basis of these welfare effects
(returns on investment), additional investments in these technologies seem justified.
4.3 The effect of ICTs on individual earnings and earnings distribution
As argued in section 3, it is possible that the diffusion of ICTs may exacerbate existing
wage inequalities in developing countries by enhancing the demand for skilled labor. The
manner in which these technologies influence labor-market outcomes, i.e. wages and
employment, has been examined by several authors, but all of their studies are based on data for
developed countries. Nevertheless, results from developed countries may provide a preview of
the outcomes to be expected in developing countries. This section proceeds by reviewing first
the evidence regarding these technologies’ effects on wages and then their effects on
employment.
4.3.1 ICTs and wages
One of the first papers to examine the impact of computer use and wages is Krueger
(1993). Krueger uses data extracts from the United States Current Population Surveys conducted
in 1984 and 1989 to explore whether workers who use a computer at work earn a higher wage
than otherwise similar workers who do not use a computer at work. Additionally, the paper
examines the extent to which the computer-usage wage premium may be responsible for the
recent changes in the US wage structure (i.e. greater wage inequality; see Juhn, Murphy and
Pierce, 1993). The methodological approach utilized by Krueger consists of augmenting a
standard cross-sectional earnings function with a dummy variable indicating whether an
individual uses a computer at work.
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That is a log linear specification:
i
i
i
i
C
X
W
ε
α
β
+
+
=
ln
,
(12)
where individual
i
’s wage rate
W
i
depends on a vector of observed characteristics
X
i
,
36
an
indicator variable
C
i
representing the use of a computer at work and an error term
ε
i
. This
regression is estimated using both data waves (i.e., data from 1984 and from 1989).
money metric utility functions associated with other standard demand functions). Note that the Marshallian surplus
estimates are often not a bad approximation of exact consumer surplus (Willig, 1976).
35
Using a computer refers only to the respondent’s direct or hands-on use of a computer with a typewriter-like
keyboard. The computer may be a personal computer, minicomputer or a mainframe computer.
36
The
X
vector includes a conventionally selected set of regressors. Specifically, years of education, experience,
occupational dummies, regional dummies, and indicator variables for marriage, gender and race.
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