International Economics and Economic Policy

, Volume 11, Issue 1–2, pp 137–163 | Cite as

Does the internet generate economic growth, international trade, or both?

Original Paper

Abstract

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.

Keywords

Economic growth Internet Trade Panel 

JEL classification

C23 L86 F10 O40 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  1. 1.UNU-MERIT and Department of EconomicsMaastricht UniversityMaastrichtThe Netherlands

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