Digital intensity, trade costs and exports' quality upgrading

Raphaël Chiappini and Cyrielle Gaglio

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Abstract: his paper studies the relationships between digitalisation, trade costs, quality upgrading and trade flows, using an extended version of a gravity model. Based on information from various sources of data, we estimate these relationships sequentially for a sample of 18 manufacturing and 14 service sectors in 40 countries over the period 2000–2014. Using input–output tables from World Input–Output Database, we define an original measure of digitalisation at the country-sector level that reflects the use of digital inputs into a country's production function. Using trade databases from the CEPII and OECD, we estimate a series of gravity models of trade augmented with this measure of digitalisation. Our results show that sectoral digital intensity positively affects sectoral exports. We provide evidence that this result is not ruled out by other possible factors, such as internet adoption or participation in a global value chain. A heterogeneous analysis also reveals that the effect of digital intensity is stronger for manufacturing trade and for trade between emerging economies. We explore two possible mechanisms explaining this positive relationship. First, we find that digital intensity facilitates trade between countries by reducing communication and transport costs. Second, we show that digital intensity improves the quality of exported products.

Keywords: Digital intensity; gravity model; Export upgrading (search for similar items in EconPapers)
Date: 2023-06-21
New Economics Papers: this item is included in nep-int
Note: View the original document on HAL open archive server: https://hal.science/hal-04154448
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Published in The World Economy, 2023, ⟨10.1111/twec.13448⟩

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Journal Article: Digital intensity, trade costs and exports' quality upgrading (2024)
Working Paper: Digital intensity, trade costs and exports' quality upgrading (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04154448

DOI: 10.1111/twec.13448

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