Volume 20, Issue 2

Digital technologies like the Internet can affect income inequality through increased demand for employment in manual and abstract jobs and reduced demand for employment in routine jobs. In this paper, we combine city-level income distribution and jobs data with broadband data from France to investigate the impact of broadband Internet access on income inequality. Using an instrumental variable estimation strategy, we find that broadband Internet reduces income inequality through increased employment in manual jobs. These effects increase with the availability of skilled workers and are significant in cities with a large service sector or high-speed Internet access. Further, the diffusion of broadband Internet comes with relatively greater benefits in low-income cities compared to high-income cities. Several robustness checks support these findings.

This paper presents a first estimation of the tourist test threshold for interchange fees that makes Peruvian small merchants indifferent between accepting cash and debit cards at the point of sale. We use the tourist test model (initially proposed by Rochet and Tirole), including tax evasion (Aurazo and Vasquez’s model) as an extra factor in the merchants’ decision between cash and card payments. Also, we revisit the existing empirical approaches and propose a new empirical approach, coined as the cash-flow approach, which assumes that small merchants estimate the overall cost in terms of the average ticket related to cash and card payments. Using a Survey on private costs of payment instruments conducted by the Central Reserve Bank of Peru in 2019, our estimates suggest that the tourist test threshold for debit cards is lower than the current interchange fee until 2019, even if tax evasion is not considered. Also, this study helps policymakers to better understand the factors around the merchants’ decision that may be considered to foster digital payments.