Abstract
The use of information and communication technologies (ICT) in commerce improves the commercial structure and economic capacity of a country. This study empirically assesses the impact of ICTs on international trade in 36 countries in Asia and the Pacific, at the sectoral level, between 2007 and 2018. The study evaluates whether ICTs improve international trade by hiring the gravity model of international trade and increasing it with the ICT variable. An ICT development indicator (IDI) is formed by joining seven different ICT variables that show ICT infrastructure, use, and skills. Using the Poisson pseudo-maximum likelihood (PPML) estimation technique, this study shows that ICTs improve trade by reducing transaction costs. The findings reveal that information and communication technology positively and significantly influence international trade in all sectors of the Asia-Pacific region, and that trade intensifies when both trading partners have a high endowment of information and communications technology. The study recommends that governments in developing countries upgrade their ICT infrastructure levels.
Highlights
It is widely acknowledged that trade is an important factor for economic growth
The findings of this study revealed that information and communication technologies (ICT) infrastructure was a vital factor for economic growth along with other macroeconomic variables
The insignificant relationship in the petroleum sector is due to the fact that petroleum product consumption in the Asia-Pacific region is almost twice what it is in the rest of the world
Summary
It is widely acknowledged that trade is an important factor for economic growth. For developing and least-developed countries, revenues from exports of goods and services to the global market are considered a vital source of foreign exchange as they ease pressure on the balance of payments and create employment opportunities (Abosedra & Tang, 2019; Thangavelu & Rajaguru 2004). ICT use results in impressive transformations in economic development, including reductions in trade costs mainly related to ongoing technological progress, and, most importantly, ICT advances (Duval et al.,2018; Hummels, 2001). As ICT helps reduce management and transaction costs, trade between countries is likely to increase despite large geographical distances between them. The World Economic Forum (WEF) report reveals that seven Asia-Pacific countries (Japan, Hong Kong, China, Republic of Korea, Australia, New Zealand and Singapore) are included in the top 20 countries on the ICT readiness parameter of the Network Readiness Index. The aggregate level trend in the progress of ICTs in Asia-Pacific developing nations presented in Figure 2 indicates that the mobile cellular subscriptions per 100 people as a standard measure of ICT expansion have risen sharply between 2001 and 2017.
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