Trade, policy, and economic development in the digital economy

Peter Herman and Sarah Oliver

Journal of Development Economics, 2023, vol. 164, issue C

Abstract: This paper assesses the impact of internet connectivity and digital trade policies on trade and welfare. Using new measures of internet connectivity, we find a significant positive relationship between internet use, bandwidth capacity, and trade. The positive relationship between internet use and trade is present for international and domestic trade, goods and services, high- and low-income exporters, and at the intensive and extensive margin. We also find that digital trade facilitation provisions in trade agreements have significantly increased trade for high-income exporters, especially for services trade. Informed by these findings, we use a general equilibrium model of trade to assess the trade and welfare impacts of increased internet connectivity and digital trade policies for developing countries. Increasing internet connectivity can have large positive welfare impacts on poorly connected countries, but these results also highlight the dangers of developing countries falling behind if they are not able to improve internet infrastructure. Introducing digital trade provisions into an existing trade agreement between high- and low-income countries can facilitate growth in trade in services for both members.

Keywords: Digital trade; Gravity; Internet; Development; Data policies; International trade; Domestic trade; Services; Extensive margin (search for similar items in EconPapers)
JEL-codes: C54 D60 F14 F68 O14 O30 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:164:y:2023:i:c:s0304387823000901

DOI: 10.1016/j.jdeveco.2023.103135

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