Digital services exports and frontier technology readiness: cross-country evidence from emerging and advanced economies

In the past few decades, technological advancements in the digital economy have opened new avenues for cross-border trade. Despite the increasing relevance of digital trade, empirical research on its relationship with technology readiness remains limited. This study examines the relationship between technology readiness and digital services exports and investigates variations across income groups. Using a two-step system generalised method of moments (GMM) estimation on panel data from 83 countries between 2014 and 2021, the results show that information and communication technology (ICT) deployment, skills, and research and development (R&D) have a significant positive effect on digital services exports, while financial access is negatively associated overall. Notably, in high- and upper-middle-income countries, skills and financial access are more influential, whereas in low- and lower-middle-income countries, ICT and R&D exhibit a stronger positive relationship with digital services exports. These findings highlight the need for different specific policy strategies: while advanced economies might need to prioritise digital skill development and ease financial constraints, emerging economies might focus on expanding ICT infrastructure and supporting innovation through R&D incentives.