Low Internet Access Driving Inequality

IMF Blog, June 29, 2020

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COVID-19 and the Great Lockdown triggered a mass migration from analog to digital and highlighted that access to the Internet is crucial for socioeconomic inclusion.
High-speed Internet is key for working from home, for children’s education when they can’t attend school in person, for telemedicine, for benefiting from social support programs, and for enabling access to financial services for everyone, especially for those living in remote areas.
Chart of the Week author and date: Mercedes García-Escribano, June 29, 2020.

"Half of the world’s population does not have access to the Internet, either through a mobile device or through fixed line broadband."
The digital divide is described as "more like a chasm, both within and between countries."
Advanced economies with the highest access rates: the United States, France, Germany, the United Kingdom, and Canada.
Big emerging economies show large disparities in Internet usage:
- "about two-thirds in Brazil and Mexico"
- "about one-third in India"
Regions with lowest access:
- "Countries in sub-Saharan Africa, followed by many in emerging and developing economies in Asia, are among those with the lowest access to the Internet"
- These regions can still be "world leaders in mobile money transactions."
Variation in firm connectivity:
- "only about 60 percent of businesses use email for business" in sub-Saharan Africa
- compared to "about 85 percent in Europe and Central Asia."

Within countries:
- Lack of universal and affordable Internet may widen income inequality and inequality of opportunity.
- Disadvantaged groups and people in rural areas face more limited Internet access, potentially worsening disparities even in advanced economies.
- A gender gap in Internet access could increase disparities in labor force participation, wages, and access to financial services where "fewer women than men own a mobile phone."
Between countries:
- Low Internet access might depress productivity in emerging and developing countries.
- IMF staff research finding: "a one percentage point increase in the share of Internet users in the population raises per capita growth by 0.1–0.4 percentage points in sub-Saharan Africa."
- The COVID-19 pandemic demonstrates that reliable Internet allows some businesses to continue operations amidst lockdowns, helping keep economies running.

Governments can foster a digital-friendly business and regulatory environment to accelerate and finance infrastructure investment by the private sector.
Government support priorities:
- Ensure Internet investment is complemented with universal electricity access.
- Use subsidies so that all households—including disadvantaged groups and those in rural and remote areas—have access to quality Internet, and to ensure there is no digital gender gap.
- Example policy responses to COVID-19: "the governments of El Salvador, Malaysia and Nepal have introduced Internet fee discounts or waivers."
Policies to close the Internet gap for firms:
- Broaden small businesses’ access to financial products such as loans to enable investments in information and communications technology.
- Digitalization can yield fiscal savings by lowering the public cost of tax compliance through greater access to taxpayer data and improved spending efficiency, which may help finance these policies.
Overall policy goal: "Given the increasing role of the Internet for the economy and for accessing public services, policies to foster an inclusive recovery must aim to tackle the digital divide within and between countries."

"You can listen to the IMF Podcast on digitalization here: IMF Podcasts · Digitalizing Sub-Saharan Africa"

Mercedes García-Escribano, June 29, 2020 — Low Internet Access Driving Inequality