Information and Communications Technology (ICT) and Trade in Emerging Market Economies

Abstract

This paper examines the effects of information and communications technology (ICT) on international trade in emerging markets. Using panel data for 40 emerging market economies (EMEs) for a period from 1995 to 2010, we estimate fixed effects models of exports and imports on ICT and other control variables. Our ICT variables include the growth of telecom investment, international Internet bandwidth, Internet subscriptions per 100 people, and the number of Internet hosts per 100 people. We use the share of total exports and of total imports in GDP as the dependent variables. Additionally, we consider the GDP share of exports and imports for goods and services separately. The main control variables are: per capita GDP growth, population growth, and the GDP growth for the rest of the world. The empirical results overwhelmingly suggest that Internet bandwidth, Internet subscriptions, and Internet hosts have significant positive impacts on export share while all four ICT variables including telecom investment growth have significant positive impacts on import shares in emerging market economies. This result is robust across shorter sample period, a subsample of EMEs, alternative estimation method, and alternative model specifications. There are important policy implications of this result for developing countries.