ICT and the blooming bloom trade

Abstract

Globalization results when markets become more integrated because of reduced transaction and transport costs. These costs have fallen because of sustained advances in transport technology and, more dramatically, in digital information and communication technology (ICT). Although communication costs tend to be a minor component of total trading costs, reductions in these costs may strongly stimulate international trade. The empirical evidence in support of this effect is, however, scant and its strength may depend on the composition of ICT. We test the hypothesis of an ICT effect on trade for the case of trade in flowers. We employ a gravity model of international trade which includes 92 countries and which covers the period from 1995 to 2006. The models explains the volume or value of flower trade in terms of the level of internet and mobile phone diffusion, and of a broad range of factors that might also affect bilateral trade. We tested whether a fixed effects model is appropriate. Mobile phone usage in exporting countries is a significant positive factor influencing trade in cut flowers in both exporting and importing countries, but its impact is less than that of fixed telephone usage. Fixed telephone usage has a significant influence on trade in both exporting and importing countries, but the impact of its usage on the value of trade is greater in exporting countries than in importing countries. Internet usage has a significant and positive effect on trade in importing countries that is comparable in magnitude to that of mobile telephony, but it has no significant effect in exporting countries.