Has the internet increased trade? Evidence from industrial and developing countries

George Clarke and Scott J. Wallsten

No 3215, Policy Research Working Paper Series from The World Bank

Abstract: If the Internet made it easier for firms to enter new markets by reducing communication and search costs, then it may also have made it easier to export goods and services. The authors find that higher Internet penetration in developing countries is correlated with greater exports to industrial countries, but not with trade between developing countries or with exports from industrial countries. Interpreting the correlations is difficult because causation may run from Internet use to exports or from trade openness to Internet use. To test whether Internet use affects export behavior, the authors endogenize Internet use by using countries'regulation of data services and Internet provision as instrumental variables. The results are robust to endogenizing Internet penetration, suggesting that access to the Internet does affect the export performance of firms in developing countries. In other words, Internet access appears to stimulate exports from poor countries to rich countries. Moreover, the analysis suggests that regulatory policies affecting telecommunications and Internet development indirectly affect trade, further emphasizing the importance of deregulating potentially competitive services in the telecommunications industry.

Keywords: Rural Communications; Economic Theory&Research; Payment Systems&Infrastructure; Knowledge Economy; Information Technology; Knowledge Economy; Education for the Knowledge Economy; Economic Theory&Research; Information Technology; Rural Communications (search for similar items in EconPapers)
Date: 2004-02-01
New Economics Papers: this item is included in nep-bec and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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