An Analysis of How Digital Technology Impacts Trade Costs—Based on the Empirical Data of RCEP Member Countries

Juan Meng, Hao Lu and Shenxiang She
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Juan Meng: Business School, Hunan First Normal University, Changsha, China
Hao Lu: Business School, Hunan First Normal University, Changsha, China
Shenxiang She: Institute of Science Innovation and Culture, Rajamangala University of Technology Krungthep, Bangkok, Thailand

Financial Economics Letters, 2024, vol. 3, issue 3, 1-12

Abstract: This paper explores how digital technology reduces trade costs using bilateral trade data from RCEP member countries and a panel fixed effects model. The findings show that digital technology significantly lowers trade costs, a conclusion that holds even after accounting for lag effects and various robustness checks. The impact of digital technology on trade costs follows an inverted U-shape: the effect is most significant in the current period, especially with a one-period lag, and diminishes over time. Larger economies and higher export levels strengthen this negative impact due to their reliance on exports and continuous improvements in domestic digital technology. The study recommends investing in digital infrastructure, formulating reasonable internet access policies, supporting digital skills development, and enhancing digital connectivity to bridge the digital divide, thereby promoting trade facilitation and efficiency.

Keywords: Digital Technology; Trade Costs; RCEP; Panel Fixed Effects Model (search for similar items in EconPapers)
Date: 2024
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