Abstract

This study empirically examines the relationship between the Internet, mobile-cellular and service trade in South Korea. From this perspective, the main objective of this study is to identify key determinants of service trade over the period from 1990 to 2018 by using the modified gravity model. To do this, the study employs ordinary least squares methods and estimates the unknown parameter in a log-linear regression model. The study recognizes that South Korea is more likely to engage in service trade if it uses the Internet and mobile-cellular as a communication tool. The empirical results show that the Internet and mobile-cellular have a significant positive effect on service trade, service exports and imports respectively. In addition, the study also shows strong evidence for the causal relationship between service trade and GDP, trade openness. However, the Internet and mobile-cellular variables have a quantitatively small effect on service trade because the study uses the aggregated data for service trade. Therefore, to achieve greater positive results of the Internet and mobile-cellular on service trade, future research needs to utilize a disaggregated trade data in services. On the other hand, as the Covid-19 outbreak has changed people’s lives and disrupted international trade, expanding access to the Internet and increasing usage are expected to play a more crucial role in enlarging service trade in the future.