High-tech trade as determinant of the US bilateral trade balance

Carlos Carrasco and Edgar Demetrio Tovar-García

Economics of Innovation and New Technology, 2023, vol. 32, issue 5, 713-730

Abstract: The relevance of high-tech industries has increased in recent years, particularly because of their effects on productivity and economic growth. However, the analysis of their relationship with the external sector is scarce, being a potential determinant of external imbalances. We examine the role of the share of high-tech exports and imports in the performance of the bilateral trade of the United States (US), characterized by a persistent trade deficit. The study focuses on bilateral data between the US and its 20 major partners, including developed and emerging countries, over the years 1990–2019. Accordingly, we developed dynamic panel data models based on the DIF GMM estimator, examining the relationship between bilateral trade balance and traditional regressors (relative income and exchange rate) and new explanatory variables (the high-tech composition of exports and imports). We found that the US high-tech composition of exports and imports has been changing over the last three decades, with the share of high-tech imports increasing and their exports decreasing. Furthermore, the regression results suggest that imports composed of high-tech goods are significant in explaining the US trade deficit, while the bilateral real exchange rate remains as a robust explanatory variable.

Date: 2023
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DOI: 10.1080/10438599.2021.2018313

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