Disentangling income and price effects in the demand for time online

Abstract

The large negative impact of income on time spent online observed among internet adopters, has been interpreted as an own-price effect created by the variation in the opportunity cost of time across income strata. However, the regression coefficient on income could also be capturing an income effect. This paper estimates a standard demand function for time online in Spain that includes a measure of the opportunity cost of time in addition to a measure of income. The effect of income barely changed when the opportunity cost of time was included.Results rather suggest that time spent online is an inferior leisure activity. JEL codes: J22, L86