ED Perspective of the Internet

This is an interesting one that makes all of us think about the role and impact of IT and the Internet on economic development.

Has the use of internet technology by businesses been greater in urban areas—following the geographic diffusion pattern of earlier computing technologies—and has it thereby exacerbated local differences in the potential for economic growth? Or, as a communications technology, has the diffusion of the internet been more consistent with the view that it reduces the importance of distance to economic activity?

Research shows that there are elements of both the global village and urban leadership views in the geographic pattern of internet adoption. By 2000, participation activities like e-mail and web browsing had diffused almost everywhere, indicating that the pattern for participation adoption is better explained by the global village view. In contrast, for complex enhancement technologies, adoption behavior is better explained by urban leadership theory; this pattern makes economic sense, because it could arise from thin technical labor markets in smaller MSAs and rural areas, which would drive up the costs of operating facilities using internet technology.

The answers to these questions are important because of their implications for regions' comparative advantage. Concentration of internet use—as implied by urban leadership—may increase short-run urban/rural differences in productivity. In the longer run, inexpensive communications may mean that establishments relocate from high-cost/high-density areas to low-cost/low-density areas. These remain open questions, however. Future work should compare the location decisions in industries where internet use is prevalent with those in other industries. This will help complete the picture of how the internet affects geographic variance in productivity and employment.

More here.