Measuring the Impact of the Internet on Trade in Services

The main purpose of this paper is to examine the type and extent of Internet’s impact on the volume of trade in services in D8 countries (including Iran) over 1995-2013 period. To achieve this purpose, a modified gravity model is estimated by the panel data using System Generalized Methods of Moments (SGMM). The results indicate that Internet penetration has a significant and positive impact on the volume of trade in services for the countries in the study; So that a 10 percent increment in the number of Internet users per 100 population (as an Internet penetration indicator) will increase the ratio of volume of trade in services to GDP as much as 0.18 percent. The results from model diagnostic tests, along with the coefficients of control variables meeting the expected sign, validates the estimation of econometric model.