The impact of information and communication technologies on bilateral trade in services

Abstract

This paper examines the impact of information and communication technologies (ICT) on bilateral trade in services. Two sets of measurements are included in our estimation models: (1) trade determinants - GDP, population, common language and distance and (2) ICT determinants - fixed broadband, fixed telephone, internet and mobile-cellular phone. Each ICT variable is disaggregated to estimate and compare for their individual impacts using three variations of service trade: (a) service trade - (a) sum of service export and service import, (b) service export and (c) service import. Data from 2000 to 2013 on the USA and 34 partnering countries are tested on a total of six models. Two estimation models are used: (1) fixed effect model and (2) pooled ordinary least squares. We find that trade determinants such as GDP, population and common language have significant impacts for all three variations of service trade. Distance shows mixed results. We also find that ICT determinants such as fixed broadband and fixed telephone have significant impacts on service trade, service export and service import. Mobile-cellular phone is insignificant for all three variations of service trade. Finally, the internet is significant for service trade and service export, but not service import.