Effects of Digitalization on Income Inequality across the Stage of ICT Development: Evidence from OECD Countries

Abstract

This study examines how digitalization influences income inequality in OECD countries, emphasizing that its effects depend on the stage of ICT development. Using panel data and a fixed-effects framework, we analyze four indicators of digitalization—fixed telephone subscriptions, mobile cellular subscriptions, individuals using the internet, and fixed broadband subscriptions—and interact them with a dummy capturing the transition to an advanced ICT era. The results show a clear stage-dependent pattern. In the early ICT-development period, digitalization reduces inequality by increasing income shares of the bottom four quintiles and reducing that of the top quintile. However, in the advanced ICT period, these equalizing effects weaken or reverse: digitalization becomes inequality-increasing, particularly for internet use and broadband subscriptions. The findings indicate that digitalization is not uniformly inclusive and underscore the need for policies that strengthen digital skills, broadband quality, and equitable participation in advanced digital ecosystems.