Effect of Social Interactions and Digital Appropriation in the Individual Labor Participation in a Developing Country

ABSTRACT The article discusses how social interactions and digital appropriation of technology affect the decisions of people to work or not work (labor participation) in a spatial context. An individual's decision to participate in the labor force is influenced by their neighbors in a spatial sense; that is, spatial neighborhoods affect individual choices related to labor supply. The digital appropriation index was built using intentions and uses of the internet to explain how social interactions between people affect individual labor participation. Spatial econometrics, using individual GPS data (latitude and longitude) in Cali (Colombia), show that social interaction and digital appropriation have positive externalities on labor participation—more appropriation of digital technology results in higher participation in the labor market. Direct effects show that an increase of one percent point (p.p.) in digital appropriation increases labor participation by 19.4 p.p. Indirect effects (externalities) show that an increase of one p.p. in digital appropriation increases labor participation by 8.5 p.p. These externalities of digital appropriation are interesting because active public policies oriented to the use of the Internet increase labor participation and improve labor market efficiency.