CHAPTER 10 - A METHODOLOGY FOR MEASURING THE IMPACT OF INFORMATION TECHNOLOGY ON INCOME INEQUALITY

The methodology adopted in this analysis is based on the work of Levernier, Rickman and Patridge (1995, hereafter LRP) who used a simple econometric model linking measures of income inequality to economic, demographic and human capital variables. The units of analysis of their model were the 48 contiguous U.S. states, for four different years: 1959, 1969, 1979 and 1989. Their model allowed them to identify some of the key variables affecting income inequality. My goal is first to replicate their results approximately for the year 1990, so that these important variables can be also identified using my dataset. Then, I will introduce variables measuring the level of states’ IT development, such as the IT intensity or the density of IT activity at the county level. I will thus be able to evaluate the effects of IT on income inequality across states. The first section describes the model used by LRP to explain income inequality.