International Trade in Telecommunication Services: A Cross Sectional Gravity Regression

The gravity model has been successful in measuring the effects of institutions, trade barriers, and other characteristics on trade in goods. Kimura and Lee [2004] find the gravity model is also suitable for measuring trade in services. The Organization for Economic Co-Development [2009a] develop gravity models for pilot service sectors such as construction, computer, professional, and telecommunication services. The purpose of this paper is to extend the findings of the OECD paper for telecommunication services. The paper finds that a 10 percent increase in distance between countries will decrease imports by 11.77 percent. Imports of telecommunication services are influenced by sharing a common language, EU membership, but no relationship exists for sharing a common border. This paper also shows that countries with higher output will import more services and that the sector level of trade restrictiveness negatively effects service imports. The paper concludes with a survey of previous international negotiations on pro-competitive regulation of the telecommunications market