THE INTERNET AND LOCAL WAGES : CONVERGENCE OR DIVERGENCE ? Chris Forman

Did the diffusion of the Internet lead to convergence or divergence of local wages? We examine the relationship between business use of advanced Internet technology and regional variation in US wage growth between 1995 and 2000.We show that business use of advanced Internet technology is associated with wage growth but find no evidence that the Internet contributed to regional wage convergence. Advanced Internet technology is only associated with wage growth in places that were already well off in terms of income, education, population, and industry. Overall, advanced Internet explains one-quarter of the difference in wage growth between these counties and all others. Chris Forman College of Management Georgia Institute of Technology 800 West Peachtree St. NW Atlanta, GA 30308 [email protected] Avi Goldfarb Rotman School of Management University of Toronto 105 St George St Toronto, ON M5S 3E6 [email protected] Shane Greenstein The Elinor and Wendell Hobbs Professor Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208-2013 and NBER [email protected]