The ICT service trade and goods trade: Are they complementary in the digital era?

Abstract

Objective: This article aims to examine whether the exports of information and communication technology (ICT) services are complementary to trade in ICT goods and overall merchandise exports. Research Design & Methods: We used panel regression models (log-log specification, Driscoll-Kraay robust standard errors accounting for cross-sectional dependence, heteroscedasticity, and serial correlation) to explore how the ICT service exports depend on trade in ICT goods (both exports and imports) and total merchandises exports. The research sample covered data for 37 developed economies over the 1998-2017 period. Findings: The results show that both the exports and the imports of ICT goods are complementary to the exports of ICT services. We also identified complementarity between total merchandise exports and ICT service exports. Moreover, global demand for services and broadband digital connectivity have been proven to be significant determinants of ICT service exports. Implications & Recommendations: The detected dependencies imply that in the digital era, export-promoting policies should not treat trade in goods and trade in ICT services separately. Moreover, policymakers should consider factors such as broadband digital connectivity and world demand as important drivers of ICT service exports. Contribution & Value Added: This study provides new evidence on determinants of one of the most rapidly growing export categories, i.e. the exports of ICT services. We identified three sources of potential complementarities arising in the digital era between trade in goods and services. Moreover, while most researchers examined the role of traditional internet, we tested our models for broadband connectivity as a determinant of ICT service exports.

Keywords

• ICT services exports
• digital connectivity
• information and communication technology
• ICT merchandise trade
• trade in services
• digital trade