Does the internet generate economic growth, international trade, or both?
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Recent cross country panel data studies find a positive impact of internet use on economic growth and a positive impact of internet use on trade. The present study challenges the first finding by showing that internet use does not explain economic growth directly in a fully specified growth model. In particular openness to international trade variables seem to be highly correlated with internet use and the findings in the literature that internet use causes trade is confirmed here suggesting that internet use impacts trade and that trade impacts economic growth. A simultaneous equations model confirms the positive and significant role of internet use to openness and the importance of openness to economic growth. Internet use shows to be more impacting trade in non-high income countries than in high income countries whereas the impact of trade on economic growth is the same for both income groups.
KeywordsEconomic growth Internet Trade Panel
JEL classificationC23 L86 F10 O40
The author is grateful to the participants of the ICTNET workshop in Parma and the Digital EU-Integration and Globalization workshop in Frankfurt for useful discussions and to Thomas Ziesemer for his critical comments and suggestions. The usual disclaimer applies.
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