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Abstract

Developing countries export more to developed, but not other developing, countries, when internet penetration is higher. Although this could be because internet penetration stimulates exports, it could also be because trade openness encourages internet use. To test the direction of causation, we allow internet use to be determined endogenously using countries’ regulation of data services as an instrument. The results suggest that access to the internet does improve export performance in developing countries, although not in developed countries. In other words, improving internet access in a developing country will stimulate exports from that country to rich countries.

Scott J. Wallsten is a resident scholar at AEI. George R. G. Clarke is a senior economist for the Africa Private Sector Group and Development Research Group at the World Bank.