Disentangling income and price effects in the demand for time online

The large negative impact of income on time spent online has been attributed to a negative own-price effect created by variation in the opportunity cost of time across internet users. Nonetheless, the coefficient on income could also be capturing a negative income effect: High-income users could reduce time spent online to consume, for example, leisure activities of higher quality. This paper estimates a demand function for time online using a time-use survey containing information on household income and individual labor earnings. In accordance with the negative income effect hypothesis, income still exerts a large negative impact after earnings are controlled for, whereas the response to earnings is negative only in certain ranges of the earnings distribution.