The effect of the internet on the margins of trade

Abstract

This paper investigates the effect of internet penetration in the form of broadband subscriptions on the extensive and intensive margins of differentiated exports, and assesses whether the internet bridges the linguistic gap in trade. Results tentatively indicate that there is a positive association between an increase in internet penetration and the extensive and intensive margins of differentiated exports. Splitting the sample into development levels, internet penetration may facilitate the extensive margin of exports between low and high income countries, but not within these groups. Lastly, an increase in internet penetration may decrease the effect of linguistic distance on the extensive and intensive margins of differentiated exports.