Impacts of Internet Use on Trade: New Evidence for Developed and Developing Countries

This paper investigates the impact of Internet use on bilateral trade flows using a gravity model and panel data for the period 1996-2014. First, we test the positive influence of Internet use on exports for aggregate data. Second, we test the impact of Internet use on bilateral flows separately for high-income countries and low- and middle-income countries. We find a significant and positive relationship between the Internet and bilateral exports for both groups of countries. The results also show that the impacts vary from 0.03% to 0.13% depending on the levels of income. Unlike previous studies, our findings suggest that the effect of Internet use is greater for bilateral trade flows among high-income countries. We contribute to the literature by investigating the differentiated impacts of Internet use for high-income economies and low- and middle-income countries. Our study uses panel data and covers the period of the greatest Internet diffusion.