The Effect of Income Inequality on Mobile Phone Penetration

Abstract

What is the relationship between inequality and the prevalence of mobile phones in a society? It is obvious that being poor is a barrier to owning a mobile phone, but what about simply being poorer than those around you? Stories abound about the benefits mobile phones bring to the poor in developing countries. For example, in Bangladesh's Narshingdi district, mobile phones have made it possible for families who once struggled to survive, to earn more than enough to eat well and live comfortably. These isolated villagers who grow crops or raise livestock can use their village cell phone to speak directly to wholesalers and are able to get better prices for their goods in the marketplace (Ahmed, 2000). In Cote d'Ivoire coffee growers share mobile phones to follow hourly changes in coffee prices in order to sell at the most profitable time (Lopez, 2000). But how likely will these poor people be to access a mobile phone if they are significantly poorer than the “rich” in their countries. In place where there is such a disparity, does unequal income distribution make it less likely that someone will own a cell phone, or does something about the condition make adopting this technology even more widespread? As it turns out, the results of this study indicate that the higher the level of inequality in a country, the more likely someone living there is to own a cell phone. While this result seems counterintuitive, I will discuss in detail a few ways to explain it after giving some background on the subject.