The Effect of Content on Global Internet Adoption and the Global 'Digital Divide'

Abstract

A country’s human capital and economic productivity increasingly depend on the Internet due to its expanding role in providing information and communications. This has prompted a search for ways to increase Internet adoption and narrow its disparity across countries – the global “digital divide.” Previous work has focused on demographic,economic, and infrastructure determinants of Internet access difficult to change in the short run. Internet content increases adoption and can be changed more quickly; however, the magnitude of its impact and therefore its effectiveness as a policy and strategy tool is previously unknown.

Quantifying content’s role is challenging because of feedback (network effects) between content and adoption: more content stimulates adoption which in turn increases the incentive to create content. We develop a methodology to overcome this endogeneity problem. We find a statistically and economically significant effect, implying that policies promoting content creation can substantially increase adoption. Because it is ubiquitous, Internet content is also useful to affect social change across countries. Content has a greater effect on adoption in countries with more disparate languages, making it a useful tool to overcome linguistic isolation.

Our results offer guidance for policy makers on country characteristics that influence adoption’s responsiveness to content and for Internet firms on where to expand internationally and how to quantify content investments.

Keywords: Internet, technology adoption, economic development, two-sided markets, network effects, technology diffusion, digital divide, language

JEL Classification: O30, O57, L86, L96