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Information and communications technology (ICT) and international trade: evidence from Turkey

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Abstract

This study analyzes the impacts of information and communications technology (ICT) on international trade between Turkey and its trading partners. Using an extended panel gravity model framework, it examines the effects of four ICT indices on Turkish bilateral exports and imports with static and dynamic panel data models for the period 2000–2014. The sample includes 35 countries that import Turkish goods and 34 countries that export goods to Turkey. The results indicate that ICT has positive and significant impacts on both Turkish import and export volumes. Additionally, ICT has a quantitatively larger effect on imports than on exports. These results are robust to alternative model specifications and estimation methods. Based on these results, some policy implications can be derived. For instance, Turkey may develop strategic trading partnerships with countries that have achieved high levels of ICT development, in order to increase its overall trade.

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Fig. 1

Source: Turkish Statistical Institute 2016. Attained from http://www.turkstat.gov.tr

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Notes

  1. ICT is a term that includes any communication device or application such as radio, television, mobile phones, computer, network hardware and software, etc., as well as the various services and applications related to them such as videoconferencing and distance learning (see http://searchcio.techtarget.com/definition/ICT-information-and-communications-technology-or-technologies).

  2. With respect to the shares of trading partner countries in Turkey’s trade, the top 20 importers and 20 exporters of Turkey account for 68.5 and 72.9% of Turkey’s exports and imports, respectively (Turkish Statistical Institute, 2016). Among them, Germany with a share of 9.3% and China with a share of 12% rank first in Turkey’s exports and imports, respectively. As for country groups, European Union (EU) countries have the largest shares in both Turkish exports (44.5%) and imports (38%).

  3. To conserve space, we only mentioned about the results of panel data studies in detail. However, there are also other cross-country studies in the literature (see Clarke and Wallsten 2006; Clarke 2008; Demirkan et al. 2009; Kurihara and Fukushima 2013; Yushkova 2014).

  4. The variables in our model are similar to those in the studies by Biswas and Kennedy (2016), Choi (2010), Freund and Weinhold (2002, 2004a). However, we could not differentiate the impacts of GDP, population and ICT variables for Turkey and its partners separately because Turkey’s data are same across all trading partners. Instead of doing this, we searched for the impacts of GDP mass, population mass and ICT mass on bilateral trade between Turkey and its partner countries.

  5. We follow the convention of using the 9% threshold as in previous studies (e.g., Vemuri and Siddiqi 2009).

  6. Freud and Weinhold (2004a, b) use this method as well.

  7. Note that ITU has been publishing data on IDI index, a composite index that combines 11 indicators into one benchmark measure for countries since 2009. See http://www.itu.int/en/ITU-D/Statistics/Pages/publications/mis2015/methodology.aspx for a detailed explanations about ICT indices.

  8. See Table  5 in Appendix 1 for the variables used to construct ICT indexes.

  9. Although our time period is short, there may be concerns over the stochastic trending properties of time variant variables, such as population, GDP, export, import and ICT indices and the potential for spurious regression problem. We conduct Levin et al. (2002) panel unit root test and the results indicate that all variables are stationary in their levels. The results are available upon request from the author.

  10. F tests results are available upon request from the corresponding author.

  11. In our sample, Bulgaria is the only exporter of Turkey while Cyprus and Bulgaria are the only two importers of Turkey that share a common language with Turkey. The impact of language may also be biased due to this fact. We also excluded language dummy and run the regressions again; however, the results for the coefficient of ICT didn't change.

  12. There is a −0.6635 negative correlation between distance and RTA in the import model. In the import model, the most trading partners of Turkey are EU member countries, located in a specific region, Europe. Therefore, there is a specific physical distance between Turkey and EU economies. Also, these countries have a Customs Union agreement with Turkey. Therefore, it is reasonable to expect a high correlation between RTA and distance. When we exclude RTA from the import model, the coefficients of all variables remain unchanged and stable. We also checked the correlation between RTA and distance for the export model; however, there is relatively a smaller negative correlation of −0.1631.

  13. We did not report the results of the coefficients of control variables, goodness of fit, and observation numbers of the regressions to conserve space. However, they are available upon request from the author. Besides, tariff rates and railway data are available only for a small number of countries in both models.

  14. There are 18 developed countries in the import model and 17 developed countries in the export model based on the IMF classification.

  15. We didn’t report the coefficient estimates results of other variables in the models to conserve space. However, the results are available from the author upon request.

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Acknowledgements

This Research Project was supported by 2219-International Post-Doctoral Research Fellowship Program of TUBITAK—The Scientific and Technological Research Council of Turkey. I would like to thank Dr. Hiranya K. Nath for his endless support and help. Also, I am grateful to the College of Business Administration, Sam Houston State University for hosting me as a visiting scholar and to Dr. Donald Freeman for his useful comments and suggestions.

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Authors and Affiliations

  1. Faculty of Economics and Administrative Sciences, Economics Department, Firat University, 23200, Elazig, Turkey

    Burcu Ozcan

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Correspondence to Burcu Ozcan.

Appendices

Appendix 1

See Tables 4 and 5.

Table 4 The country samples in the models
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Table 5  Composition of ICT development index (IDI)
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Appendix 2

See Tables 6 and 7.

Table 6 Descriptive statistics for the variables in the import model
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Table 7 Descriptive statistics for the variables in the export model
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Ozcan, B. Information and communications technology (ICT) and international trade: evidence from Turkey. Eurasian Econ Rev 8, 93–113 (2018). https://doi.org/10.1007/s40822-017-0077-x

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