Costs or Gross Benefits? What mainly drives cross-sectional variance in internet adoption

Abstract

In this paper, we propose an empirical model of Internet adoption which takes into account the household’s desire to adopt the Internet. Our research supports three central findings. First, we determine the main factors that explain the cross-sectional variance in gross benefits. Second, we estimate the predicted probabilities that a household does not desire to adopt the Internet and that a household desires to adopt the Internet but does not because its adoption costs are higher than its gross benefits. We show that while the cross-sectional variance in the first predicted probability is high, the cross-sectional variance in the second one is low (except for the age factor). Third, we compute the predicted adoption probability assuming that the adoption costs are homogeneous across households. We show that, for a given dimension (except for the age factor), the adoption rate will be only slightly modified if the adoption costs are homogeneous across households. Our results support the argument that the digital divide is mainly due to differences in gross benefits of adoption.