Has the internet increased trade? Evidence from industrial and developing countries
AbstractIf the Internet made it easier for firms to enter new markets by reducing communication and search costs, then it may also have made it easier to export goods and services. The authors find that higher Internet penetration in developing countries is correlated with greater exports to industrial countries, but not with trade between developing countries or with exports from industrial countries. Interpreting the correlations is difficult because causation may run from Internet use to exports or from trade openness to Internet use. To test whether Internet use affects export behavior, the authors endogenize Internet use by using countries'regulation of data services and Internet provision as instrumental variables. The results are robust to endogenizing Internet penetration, suggesting that access to the Internet does affect the export performance of firms in developing countries. In other words, Internet access appears to stimulate exports from poor countries to rich countries. Moreover, the analysis suggests that regulatory policies affecting telecommunications and Internet development indirectly affect trade, further emphasizing the importance of deregulating potentially competitive services in the telecommunications industry.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 3215.
Date of creation: 01 Feb 2004
Date of revision:
Rural Communications; Economic Theory&Research; Payment Systems&Infrastructure; Knowledge Economy; Information Technology; Knowledge Economy; Education for the Knowledge Economy; Economic Theory&Research; Information Technology; Rural Communications;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
- NEP-BEC-2004-09-12 (Business Economics)
- NEP-NET-2004-10-30 (Network Economics)
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