Communication technology and how it flattens the world: a study on the determinants of trade openness in lower income countries
Date
2017-06
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Abstract
In this paper, we attempt to quantify the effects of communication technology on the willingness or openness of a country to engage in trade. The communication technologies that we focus on are cellular phones and the Internet. Given the great changes that occurred in communication technology over the past decade, it is beneficial to know just how much exactly it affects how a nation conducts its trade relations with other nations across the globe. Cell phones and Internet access have become necessities in this day and age and their value is intuitively positive. This paper features an OLS and a Fixed Effects regression on trade as a percentage of GDP as a stand-in for the willingness or openness to engage in trade as the dependent variable and broadband and cellular/mobile phones per 100 subscribers among other factors as the independent variables, restricting the sample to only low- and middle-income countries. Cellular subscriptions emerge as a robustly positive and significant determinant of openness to trade, implying that the increased presence of communication technology only serves to facilitate trade among developing economies. This also suggests that poorer or developing countries have a lot to gain in increasing the presence of communication technology within their borders.