Determinants and wage effects of computer adoption in Eastern Europe

Yemisi Olufunmilayo Kuku

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: A large body of work has been published about the impact of computers and related technologies in more advanced economies, but much less is known about the role and impact of these technologies in the former communist countries of Central and Eastern Europe. Data from the Intermedia national survey of nine Central and Eastern European countries collected in the year 2000 was analyzed to identify the determinants of computer adoption and consequent effects on income. The method of two stage least squares was used in the process, with a probit equation in the first stage, and an Ordinary lease squares regression in the second stage. The digital divide in this region of the world was also examined by means of the Even and Macpherson Decomposition. This thesis establishes the importance of human capital, age, language skills and infrastructure as determinants of computer adoption in these economies, which is quite similar to developed country findings. It also finds that there is an increase in productivity, measured by wages, as a result of computer use, and the computer premium ranges from 21 to 24 percent. In terms of the digital divide, while there is a statistically significant difference in adoption rates between Russia and other groups of countries, it is due to differences in coefficients, not characteristics.

Date: 2003-01-01
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