Information and communications technology (ICT) and services trade

Abstract

Using panel data for 49 countries from 2000 to 2013, this paper empirically examines the impacts of ICT development on exports, imports, and total trade of ten service items. Unlike most previous studies, seven different ICT variables are used to construct a comprehensive ICT development index (IDI) that captures the access, use, and skill aspects of the technology. The results indicate that ICT development has significant positive contributions to the growth of international trade in seven (of ten) service items. For two of these – financial and other business services – both exports and imports are significantly impacted by ICT. It also has significant positive effects only on exports of transportation services and only on imports of insurance services, royalty and license fees, telecommunication services, and travel. Five of these services are ICT-enabled: this technology plays an important role in the production and delivery of these services. When we consider total (exports plus imports) trade, ICT has significant positive effects on six of the items, including financial services, insurance services, other business services, royalty and license fees, transportation and travel. Among the three aspects, ICT use is found to be more important than access and skills for trade in a number of services. These results provide interesting policy insights for ICT development and growth of services trade.