30 Pages Posted: 1 Aug 2002
Date Written: August 2002
In an effort to alleviate the perceived growth of a digital divide, the U.S. government enacted a major subsidy for Internet and communications investment in schools starting in 1998. The program subsidized spending by 20-90 percent, depending on school characteristics. Using new data on school technology usage in every school in California from 1996 to 2000 as well as application data from the E-Rate program, this paper shows that the subsidy did succeed in significantly increasing Internet investment. The implied first-dollar price elasticity of demand for Internet investment is between -0.9 and -2.2 and the greatest sensitivity shows up among urban schools and schools with large black and Hispanic student populations. Rural and predominantly white and Asian schools show much less sensitivity. Overall, by the final year of the sample, there were about 66 percent more Internet classrooms than there would have been without the subsidy. Using a variety of test score results, however, it is clear that the success of the E-Rate program, at least so far, has been restricted to the increase in access. The increase in Internet connections has had no measurable impact on any measure of student achievement.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Suggested Citation: Suggested Citation
Goolsbee, Austan and Guryan, Jonathan, The Impact of Internet Subsidies in Public Schools (August 2002). NBER Working Paper No. w9090. Available at SSRN: https://ssrn.com/abstract=321356