The Effect of Internet Development on International Trade in Services

The emergence of Internet, communication and information technology as the third millennium gift, have changed various aspects of human life. Internet has dramatically reduced the communication costs due to removing time and place limitation of economic transactions Services trade is part of international trade. Increase in services trade is mostly due to development of internet systems around the world. The purpose of this research is to study the effect of internet development on international services trade of all countries in the world. To do that, using panel data method and adjusted gravity model, we have examined the effect internet development on service trade. The results proved a positive and significant relation between internet and services trade. Furthermore, there is a positive and significant relation between services trade and gross domestic product, financial depth, and population. The outcomes from analyzing sensitivity model also showed that the results are not sensitive to the change of time period, statistics sample, and internet replacement.