Abstract
We empirically determine the role of different forms of infrastructure on a country’s trade. We use an augmented gravity model that incorporates infrastructure in the estimation of merchandise trade flows. We take panel data, including China and 21 selected Asian economies, from 1999 to 2018. We find that the panel ordinary least squares (OLS) and poisson pseudo maximum likelihood (PPML) model estimations prove to be significant. Proxies for Transport Infrastructure including roads, railways, and sea transport, and Proxies for information and communication technology (ICT) infrastructure consisting of mobile, electricity, and internet connections show a strong and positive impact on trade while air transport and landline phone connection have an unexpected negative effect on trade. The positive estimates for quality of infrastructure signify that high standards of Transport and ICT infrastructures lead to increased trade flows of the exporting and importing countries. Results also show that cultural similarity leads to increased trade flows between China and its trading partners in Asia.
Highlights
As nations focus on sustainable development and globalization goals in the modern era, international trade plays a critical role
This article aims to address the relationship between trade and different types of transport and information and communication technology (ICT) infrastructure using the case of China and selected trading partners in Asia
This article assumes an augmented form of the model with the inclusion of new variables and dummy variables to estimate the relationship of the dependent variable and independent variables
Summary
As nations focus on sustainable development and globalization goals in the modern era, international trade plays a critical role. The importance of infrastructure on affecting diverse outcomes on the economy, including trade and commerce, cannot be neglected, and their impact on the exports and imports of the country cannot be denied. Infrastructure is considered the backbone of a country’s economy as it enables efficient use of the available resources through enhancing mobility and accessibility (The World Bank, 2020b; World Trade Organization, 2018). Trade within the country is enhanced and developed. It is obvious that enhancement in trade, exports, and imports is often assumed to lead to more employment, higher wages, and similar positive results (Donaldson, 2018)
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