Impact of Commercialization of the Internet on International Trade: A Panel Study Using the Extended Gravity Model

Abstract

This article tests the proposition that information and communication technology (ICT) and the Internet have enhanced international trade. Until recently, a sufficiently lengthy series of data as not available to make valid comparisons of international trade before and after the commercialization of the Internet. The use of balanced panel data for 64 countries (representing many phases of economic development) for the years 1985 to 2005 and the instrumental variable approach of Hausman and Taylor and other panel data methods provide an adequate basis for our conclusions. The results of the study are unequivocal and robust. There is a positive and significant effect of ICT infrastructure and the availability of the Internet for commercial transactions on the volume of international trade.

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