Computer and Internet use, especially in developing countries, hasexpanded rapidly in recent years. Even in light of this expansion intechnology adoption rates, penetration rates differ markedly betweendeveloped and developing countries and across developing countries. Toidentify the determinants of cross-country disparities in personalcomputer and Internet penetration, both currently and over time, weexamine panel data for 161 countries over the 1999-2004 period. Weexplore the role of a comprehensive set of economic, demographic,infrastructure, institutional and financial factors in contributing tothe global digital divide. We find evidence indicating that income,human capital, the youth dependency ratio, telephone density, legalquality and banking sector development are associated with technologypenetration rates. Overall, the factors associated with computer andInternet penetration do not differ substantially between developed anddeveloping countries. Estimates from Blinder-Oaxaca decompositionsreveal that the main factors responsible for low rates of technologypenetration rates in developing countries are disparities in income,telephone density, legal quality and human capital. In terms ofdynamics, our results indicate fairly rapid reversion to long runequilibrium for Internet use, and somewhat slower reversion for computeruse, particularly in developed economies. Financial development, eithermeasured as bank lending or the value of stocks traded, is alsoimportant to the growth rate of Internet use.
