Does the internet generate economic growth, international trade, or both?
Huub Meijers
#2012-050
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 seems 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 has been shown to impact trade
more 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.
JEL classification: C23, L86, F10, O40
Keywords: economic growth, internet, trade, panel